Fixed rate loans are a popular option when it comes to borrowing significant amounts of money. A fixed rate loan allows you to budget a monthly payment for a period of time that is never going to change. If your loan payment is $100 a month today, in 20 years it will still be $100 a month.
Before taking out a fixed rate loan, you first need to evaluate your needs and your means to repay the loan. Ask yourself the following questions:
- What is the fixed rate loan for? Determine if the purchase you are looking to make is worth the additional monthly payment you will be incurring.
How much do I need? Prior to applying for any loan, you will need to have an idea of how much you want to borrow.
What can I afford to pay on a monthly basis? Create a budget to make sure that you can afford to pay back the loan.
What are the costs to get the fixed rate loan? Some secured loans, such as home mortgages, carry initial fees that are usually in the thousands of dollars. Ask the bank for a fee schedule prior to signing the final papers.
Is the loan going to be secured? Some loans, such as home mortgages and auto loans, are secured by the property you borrow against. If you default on the loan, the bank can take the property. Other loans, including student loans, are unsecured. These unsecured loans typically carry a higher interest rate, as there is no collateral for the bank in the event of a default.
Now that you have prepared yourself to get a fixed rate loan, there are three ways to get a quote from your bank or financial institution.
- Visit your local financial institution. Simply walk into the local branch of your bank of choice and request to speak with a banker regarding a fixed rate loan. The bank will assist you by providing the necessary paperwork and explaining the loan process.
Call the bank if you'd prefer to handle the loan from home. Many banks will now take the loan information over the phone so they can begin processing the paperwork. You may complete the paperwork by mail or you may have to go into a bank to sign the final documents.
Another home option is to apply for the loan online. Most banks and credit unions will now accept your application online. Complete your online application and you will be contacted by the bank shortly. Some banks will follow up by email, others by phone and some by traditional mail.
After completing the application process, regardless of method chosen, the bank will walk you through the final paperwork. You have now received a fixed rate loan!