Wednesday, September 10, 2008

The Dangers Of Introductory Loan Rates

If you want to know how to separate the good offers from the bad, then here is some advice for you. Being cautious will help you to avoid being conned and ending up paying more than you should. Although there are many excellent loan rates and offers out there, it pays to be cautious about introductory loan offers.

If you are tempted by an offer of a loan that seems too good to be true, then it probably is.

Advance fees for a low rate

Once trick you should avoid is the companies who ask for an advance loan fee which will be returned to you after a period of time, and in exchange you will get a really low interest rate. These companies are usually bogus, and you will probably never hear from them again, having lost your advance fee and received no other funds. Always make sure the companies you apply for loans from are reputable companies with an excellent history.

Low rates but high fees

Although some low rates really are low, they come with other hidden charges and fees that will cost you large sums of money. You might have to pay large processing fees, or the fees for late payment and early repayment might be extremely high. Before taking advantage of the low loan rate, make sure that the other charges are not going to cost you huge amounts of money.

APR advertising not always true

Although you might see a great offer for a loan, the APR that they advertise might not be the one you can actually get. This APR is probably true, but is only given to people with perfect credit records over a certain period of time. In general, the APR you can get will be higher than this, meaning the loan will not be as great an offer as you think.

Pre-approval letters

Another danger when looking at introductory loan offers is pre-approval letters. Although less common than credit card letters, getting letters through the post guaranteeing a great loan are getting more common. All you have to do is fill in the form and you will have the loan. However, the lenders might employ the bait and switch technique. This means that the amount you are pre-approved to borrow at the great interest rate will be replaced with a lower amount at a much higher rate. You have already signed the agreement and might be stuck with the loan. Make sure that with any loan you apply for that you are really getting what you want.

Good offers are out there

However, as long as you shop around for a reputable loan deal and borrow only what you can afford, you will avoid the dangers of introductory loan offers. The only danger with this is that you will borrow more than you can really afford to repay, which will leave you in serious financial difficulty. Lenders are more eager to lend you money than ever, and are consistently reducing their interest rates in order to entice customers.

Despite the dangers, there are plenty of great offers available.


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