Three Questions to Ask Before You Take Out a Loan

loan questions to ask

It’s that time of year again when everyone is making new purchases; new cars, new homes and new everywhere. Whether you are looking to remodel your existing home now that the holidays are over and you have more time, you are looking to buy a new home or you are looking to even just buy a new car, now is the time to ensure you have thought about the real cost of your loan. It’s not uncommon to forget to ask yourself a few very crucial questions prior to applying for a loan, and we want to remind you never to sign on the dotted line until you have asked and answered these three imperative loan questions.

Can I Afford It?

This is more for a loan that goes for a house than anything else. It’s not uncommon for the bank to tell you that you can afford more than you actually can. The bank doesn’t take account the fact that you like to travel, go to dinner, shop at the supermarket for things like food, raise kids or even pay for lawn care and household items. Just because the bank tells you that you can afford it does not mean that you actually can afford it. Do the math and figure out where you are comfortable on your own.

How Much Do I Really Need?

Your house is absolutely perfect in every way. However, you do have to replace that outdated bathroom, so you decide you will take out a home equity loan. You can get $50,000 from it, so why not, right? Wrong; you do not need to spend that kind of money on that project, so now is the time to think about you need to spend and only take that much out – more is never a good idea.

Are Their Hidden Costs?

Now you have to think this through; what hidden costs are associated with this loan? Do you have to pay closing costs when you are done with your loan? Are you going to pay fees that you cannot afford? For example, are you paying private mortgage insurance on a loan since you didn’t put down enough money? That’s a cost you have to consider.

Each of these items is a cost that you have to consider before you apply for a loan. If you cannot honestly answer these questions with satisfactory answers, it’s not time to take out a loan.

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