How Loan Agreements Have a Dramatic Impact on Your Life
Many of us hear a term like a “loan agreement” and our eyes glaze over. We simply don’t like documents that are essentially long pieces of fine print - and what’s worse, we don’t even understand them well enough to get what’s going on even if we do read the fine print. A loan agreement, to too many people, is simply something you skim over and quickly sign on the dotted line - and that’s it. It’s a means to an end. Well, a loan agreement might be a means to an end, but understanding just how much of an impact this “means” can have on your life will require a little more knowledge about loan agreements. Here’s how to understand yours. First, a great deal of “loan agreements” refer to mortgage agreements. Why? Because so many people take out loans for houses - in fact, it’s pretty much standard practice. You might have other agreements in your life, but they don’t often require loans being made. A loan agreement doesn’t just have to refer to a mortgage agreement, though. It can be any type of loan agreement - a car loan, a boat loan, a motorcycle loan, a business loan, a jewelry loan. Basically anytime you sign an agreement upon taking a loan, you’re signing a loan agreement. Given how much debt you can taken on by signing a loan agreement, it stands to reason that a loan agreement can have a dramatic impact on your life. If you sign a 30-year mortgage agreement, for example, then you’re committed to a major amount of money for a major amount of time. There’s no escaping that kind of agreement unless you can buy your way out of it. Similarly, other loan agreements will have similar terms - unless you make the payment of the loan in full, there’s really no way to get out of the money you owe. That’s why you sign loan agreements in the first place. But this commitment isn’t all a loan agreement will impact. Your monthly loan payments and the interest that adds up will also be major factors in determining a loan’s impact on your life. That means variables, like your credit score, will also come into play. A loan agreement made with someone with bad credit will typically cost a lot more money than a loan agreement made with someone with very good credit. They don’t necessarily teach you about credit in school, but understanding why having a good credit score can be beneficial for you - very beneficial - is paramount to saving a lot of money in the future. Loan agreements can also impact your life with the fine print. Understanding how defaulting on a loan will impact your credit, your finances, and your future is vital - and why you never want to default on a loan. That’s why you’ll need to read your loan agreement upfront to make sure you understand all that you’re agreeing to - and all that you’re committing yourself to.