Comparison

Reports

It is not uncommon for you as a borrower to face two or more loan options. You are usually concerned about getting fast and affordable loans that fit their needs. In the same way, lenders also compare multiple factors to ensure they are on the right track. To do this, both parties compare several factors. While borrowers compare loan terms and lenders, lenders compare loans based on grades. For lenders, they compare to determine the risk and quality of a loan.

Comparison of Loan Terms

Here’s a list of terms or factors that is relevant during the comparison.

Interest Rate

This term is the percentage of the borrowed sum a lender receives from the borrower. 

Collateral

This term refers to the security a lender holds for a loan. Borrowers usually lose their assets if they cannot repay the loan. Borrowers may have to choose between secured or unsecured loans. 

A secured loan requires you set down an asset as a security for your loan. However, unsecured loans do not require this. Secured loans attract higher interest rates than unsecured loans.

Fees

In loans, lenders may charge extra fees during the loan period. These fees may be processing fees, penalties for early payment, or late payment fees.

Loan Term

This term is the monthly period a loan for which runs—the shorter a loan term, the faster the period required for a borrower to pay back.

Monthly Payment Terms

This term is the amount a borrower has to pay each month until the loan period ends. Borrowers usually consider how much remains for their needs after the monthly payment.

The Total Amount

Borrowers also consider the entire amount they will pay. This amount includes interest, loan principal, and fees. 

Lenders are concerned about credit risks. These credit risks include the possibility of a borrower not repaying loans. Lenders determine which loan portfolios they should invest in through Loan Grades. 

Lenders get Loan grades by comparing and analysing several factors.

This factor assesses how worthy a borrower is for a loan. To determine a credit score, the lender considers the income of a borrower and existing debts. A credit score can also involve the type of loan requested and a borrower’s credit history.

Lenders always consider the history of a borrower with paying back loans. This factor largely determines how high the credit risk will be.

This factor considers the financial status of a guarantor or the value of the collateral. Lenders usually compare guarantor support and collateral to the loan amount.

Lenders also consider how much a borrower spends on their needs. They also consider the possibility of unexpected expenses and how much a borrower’s remaining income can cover.

This factor is a comparison of the loan amount to the value of a property. Lenders consider the loan to value ratios in equipment loans and mortgages.