Shopping for a loan is in many ways similar to shopping for a washing machine, an automobile or a frozen pizza. You set out to locate a particular good or service that best satisfies your needs at the lowest possible cost. Loans, like most goods and services, are offered in several forms, from the most basic to the very fancy, and at widely varying prices. Just as you must determine which make and model of washing machine best satisfies your laundry needs (size, color, electronic versus manual controls, and etc), so too should you identify the type of loans that best meets your particular borrowing requirements.

So, what are the 3 basic decisions you should come to grips with before seeking a lender? It is this...

1. How much you wish to borrow

The first thing you need to determine is the amount of money you need. This requires that you estimate the cost of whatever it is you intend to buy or do. What is the cost of the new car?

2. The length of time the money will be needed

Do you need the money for a month, six months, a year, or 20 years? Perhaps you need $3,000 to pay college tuition and expect to be able to repay a loan within a month, when financial aid approval is expected. If the aid isn't forthcoming, you feel that you should be able to pay off the loan and finance charges by the end of one year. On the other hand, perhaps you are planning to purchase a new car and require a loan of 5 or more years. Your ability to make the required payments will be a major factor in determining an appropriate maturity. The more income you will have available to meet loan payments, the shorter the maturity of a loan you can handle, and the less total interest you will pay.

3. Your preferred method of repayment

Would you prefer to retired the loan with a series of equal monthly payments, or would you rather reply the entire amount of the loan in one lump sum? If you choose the single-payment option, would you prefer to pay interest charges annually, or would you rather have interest charges accumulate until the date on which the loan is schedule for repayment? It is always wise to build some flexibility into your repayment preference, because it may appear unrealistic in the eyes of the potential lenders.

Warning: Please do not neglect the above tips if you want to get your loan approved!

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