Are you anxious about the possible burden it may cause?
Make sure before you apply for one, you’re aware of the advantages and disadvantages. You have to consider lots of factors because having a loan is an added responsibility. So study and research hard before jumping in.
Below are some questions you have to ask yourself when applying for a loan.
What is the purpose of the loan?
This is the most important question to ask yourself. What is the loan for? Is it for education, travel, medical, car or business? Do you really need this? Is it necessary? Or perhaps this is just to fund a certain luxury?
You should be clear about your motives and objectives. Make sure to use the loan proceeds to where it is supposed to be.
Be certain also of the amount you need to loan. How much do you really need and how you plan to use it.
Keep in mind that the loan benefits should significantly outweigh the costs.
Are there alternatives aside from getting a loan?
You may not need to apply for a loan if you have family or friends who are willing to lend you for no cost or a minimal interest rate. You can save interest expenses this way.
Convince them why should they let you borrow their money. Discuss the purpose and the payment terms. If you borrow from friends and family, there is less pressure, fewer worries, less documentation, and fewer hassles!
Just remember to be good on your promise to pay them on time.
Another favorable alternative aside from getting a loan is to get a part-time gig.
What are the interest rates and loan term if you borrow?
Do not get swayed by advertising. Check how reasonable the interest rates are. Some offer low-interest rates but repayments carry on over a longer period of time. You may also visit online sites to compare the latest rates before applying.
Consider also if the offer is with a fixed or variable interest rate. If you will avail of a fixed rate loan, you will know exactly how much you will be paying every month. If it is variable, it depends on how the economy is doing. Here, you could end up paying more or less interest compared to others.
How long will you pay for the loan? Five years, 10 years, or 20 years? Remember that the longer you pay for the loan, the higher the interest rate. Ask your lender if they offer possible restructuring.
Restructuring means changing the term of the loan including interest rates. They may allow you to pay earlier if you have the means or much later in case you experience financial difficulties.If possible, avail a loan that is flexible.
Are there charges and penalties or hidden charges?
If you fail to pay on your due date, how much will be the penalty? It is usually high so always pay your debt on time. You may use auto- debit facilities from banks as a safeguard.
Getting a loan may have lots of fees associated with it. Fees to look out are establishment fee, servicing fee, early exit, early repayment, insurance and others. Before signing those loan papers, make sure that there are no other hidden charges by knowing everything you’re going to pay. Read the contract very well before finalizing the deal.
How do you plan to pay it off?
Do you have the means to pay the loan? Assess your current financial situation. Compute your income and expenses monthly and plan your finances. Look for additional income to sustain your needs. If you are doubtful, do not avail because this could put you in grave trouble.
Do you have assets and other properties? Some loans require collateral to secure the loan. You might need a co-maker also to cover for you in case of default.
The most important factor in deciding whether to loan is you.
Getting a loan is a risk but is recommended if you will be able to use it wisely. Make sure to do your homework before applying to secure the best for your needs.
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