When you’re searching for a loan of any kind, whether it be a personal loan, business loan, mortgage, or student loan, the thing you need to keep in mind is that no two loans are the same. Every loan you seek will have different terms, conditions, and benefits than any loan you previously received. It’ll even be different from a similar type of loan one of your friends or family members received. The key to getting a good loan is making sure it has benefits that work for you and aren’t necessarily going to be in every loan offer. Here are a few benefits that you should be looking for when you try to find a loan that’s going to work best for you.
No Prepayment Penalties
With all loans, you want to make sure there’s a fair payment plan that will fit your budget so that you can pay back the loan on time. However, your goal should always be to pay back a loan ahead of time if you can. Even if you’re not sure if that’ll be realistic, it’s still important that you get a loan that has no prepayment penalties. Many lenders will sneak into the fine print stipulations that paying the loan back early comes with a penalty. Lenders do this so they don’t miss out on interest they won’t get if you pay them back ahead of schedule. But you shouldn’t be punished for trying to eliminate your debt as soon as possible, which is why you should look for a loan with no prepayment penalties.
0% APR
It seems almost impossible to think that a loan could come with 0% interest, but there are many car dealerships, furniture stores, and electronics retailers that will offer people 0% APR on a loan if they make a big purchase. Obviously, this isn’t exactly the norm with most loans, but it is a special benefit you will sometimes find. However, you should know that there will likely be trade-offs in other areas if all you have to do is pay back the principal on the loan without any added interest.
Sometimes the 0% APR only applies for a limited time, so if the loan isn’t paid back quickly, you’ll start to be charged interest. Other times, there will be deferred interest that you could be charged retroactively if you make a late payment. If you get a 0% APR offer but end up having interest tacked on because you miss a payment or don’t pay it back on time, you should know that the interest rate will typically be higher than standard loans. Getting a 0% APR offer can be a good deal, but only if you read the fine print first and know that you’re going to be able to pay it off on time.
Minimal Security or Collateral
Getting an unsecured loan that doesn’t require putting up collateral or a lender checking out your bank accounts can be a good way to get money for a big purchase or consolidate your debt. This tends to be more common with personal loans, making them useful for people with good credit but not many assets. In fact, if your credit score is in the 700s or 800s, you may be able to get a loan with a low-interest rate and little or no collateral. It’s also simple to get these types of loans from banks, credit unions, or online lenders. The caveat is the amount you can borrow is sometimes limited and your credit score can take a hit if you start missing payments. However, getting a loan without having to put up much collateral can be a nice benefit for those who can get one.
Automatic Payments
Automatic payments are one of the newest benefits lenders are starting to offer with loans. It’s a great way to ensure that you never miss a payment or pay any fees associated with a late or missed payment. As long as you’re not worried about overdraft, you won’t even have to think about having to make your monthly payment. You can even set up an automatic payment that’s more than the minimum so that you pay back the loan faster and limit the interest that accumulates. There’s also the option of mailing in a little extra when you get a chance.
The best part of automatic loan payments is that lenders usually prefer it and will often give borrowers a slight reduction in their interest rate if they enroll in automatic payments. Even if the interest rate is just one-quarter of a percent lower, that could add up to a few hundred dollars over the course of a loan, which is far from nothing. Obviously, making automatic payments isn’t going to be the best option for everyone, but if your lender offers it as part of your loan, it can be a nice perk.
Late Payment Grace Period
Some lenders are a little cutthroat when it comes to borrowers while others remember that those taking out loans are humans who are prone to mistakes. Naturally, you’ll want to go with the latter and hope that your loan comes with a late payment grace period. You’re obviously not planning on making any late payments, but sometimes life comes at you fast and there’s no way to avoid missing your payment. With loans that have a grace period, there will be a one or two week period between the official due date of your monthly payment and the time when you’ll be charged a late penalty or have the late payment added to your credit report. This loan feature gives you just a little leeway to make a small mistake without being punished for it. Not every loan is going to have this and not every lender will be nice enough to offer it, so it’s a great benefit to have if you can get it as part of your next loan.