Why should you pay more for you loan finance?
It is a very well known fact that the most ideal way to cheap loan finance is to select a product which has a low interest rate option. Although this might be the most common and well known avenue, there are certain other ways or steps with the help of which the borrowers can keep a check on their repayment schedules and the amount of interest payment that they are making. Keeping the following in mind, borrowers can achieve their goal of not spending extra money in their repayment schedule:
Cost benefit analysis
Often loan products look very attractive and a steal; in the advertisements and promotions which are used to get the prospective customers attention. These advertisements and promotions are conducted in order to attract new prospective business and might not be as cost effective or cheap as they may be projected. The borrowers should keep in mid that the more attractive the advertisements look the more chances of the product being less effective and cheap in the long run will it work out for the borrower. Comparison or overall cost benefit analysis of all the products available in the market should be done by the borrower before finalizing or pin pointing on a particular product. These will help in highlighting all the aspects of the product and how cost effective or beneficial it will prove to be in the long run for the borrower.
Opt for a daily interest calculating product
It is always advised to choose or opt for loan products which calculate interest on outstanding dues on a daily basis rather than the ones in which it is calculated annually. The advantage with products with daily interest calculations is that they will calculate the interest on a daily basis for the amount due, which is quite useful, for borrowers who regularly make prepayments over and above their normal repayment schedule. In such cases, if the plan calculates interest on annual basis and there have been additional part payments being done as well, the annual interest will be calculated on the higher amount, which might negate the effect of making extra payments in the longer run. Such scenario in a daily interest calculation situation will mean, charging of extra interest only for the exact number of days in a year, after which the part payment was done.
Ensure no repayment charges
Most of the banks in order to prevent its borrowers from opting for refinancing option at the end of the loan introductory period, levy extra repayment charges on the borrowers. These extra repayment charges are levied generally during the introductory period, but in certain cases, the lending institution in the wake of their business interests levy this charge which is extended even when the introductory period expires. Borrowers, while opting for a loan should ensure that there are no extra repayment charges and especially not over their introductory period. This will help them in opting for better refinancing options at the end of their discounted introductory period.
Opt for lower interest charge plans
Most of the lending institutions tend to charge higher interest rates to borrowers who are looking at a financing option which would include financing of the maximum amount of the collaterals value. In some cases, lending institutions tend to charge these dues upfront while in some cases it is built into the borrower’s repayment schedule, making the payments mode higher in the long run. A customized finance product should be opted for in such cases, which help you avoid extra amounts to be paid in the longer run.