If you’re planning to make a major purchase in 2025, it’s important to understand your financing options. From buying a car, to purchasing a house, to paying for a college education—finding the right loan (and working with the right loan officer) is critical to ensure you get the best possible rate over the long term. Read on for five tips to get you started.
Before looking for the right loan, be realistic about what you can afford. Sure, it might be possible to get financing for a brand-new Rolls-Royce—but is that the car you need? What would your debt and monthly finances look like if you choose a five-year-old Toyota sedan instead? Build a budget before finding a loan, to understand what you can and can’t afford. Remember: just because you have access to financing doesn’t mean you have to use it. If you’re currently paying off credit card debt or any other form of high-interest debt, speak with a financial expert before taking out more loans.
Predatory loans come with sky-high fees and interest rates, trapping unsuspecting borrowers into a financial hole which may become impossible to escape from. Unfortunately, predatory lenders often prey on borrowers with a poor credit score and limited choice. To avoid bad-faith lenders, always work with a reputable financial institution, such as a credit union or bank. Read the fine print and ask questions if you don’t understand what your monthly payments will look like. Most importantly, if the terms of a loan look too good to be true—they probably are.
While you don’t need to understand every piece of financing jargon in your loan’s terms and conditions, it’s important to know the basics. Most loans are advertised in terms of APR, which stands for annual percentage rate. Your APR includes not only the interest rate, but additional fees and charges. So, if you notice your APR is higher than your interest rate—that’s why. An installment, on the other hand, refers to the amount a borrower agrees to pay every month. These monthly payments usually cover your principal (i.e., the original amount of the loan) and interest. If your loan officer uses other words you don’t understand, speak up and ask questions! A good loan officer will be happy to help you understand the terms of your financing agreement.
Most financing options require monthly payments across an agreed-on term. Before signing on the dotted line, make sure you are prepared to make these payments in full. Late or missing payments can lower your credit score and tack on additional fees or interest to what you owe. Some borrowers prefer to set up autopay, so that monthly payments are automatically made from a savings or checking account. If you have access to a loan with flexible terms, you may have the decision to lower your monthly payments by extending the length of the loan—although keep in mind that, typically, a longer loan term means higher interest rates.
Are you a graduate student? How about a first-time homebuyer? Depending on a variety of personal and financial circumstances, you may qualify for special financing options. At Harvard FCU, for example, students enrolled in a graduate degree program can take advantage of fixed interest rates with the Flex Graduate Loan. First-time homebuyers, meanwhile, may be eligible for $1,000 in credits and free pre-approval. Parents can help their undergrads pay for school with a Harvard FCU Parent Loan, and people who already own a home may be able to draw funds from a Home Equity Line of Credit. Talk with a loan officer to learn what other financing options you might qualify for.