There are many reasons why you need a loan. While getting a loan is good it also have its downside. But with little help and information you might just understand how to get the right loan for yourself. The loan options/tips provide in this article is geared at helping you getting the right loan.
It is important to note that the loan options/tips provided in this article is not meant to push anyone into getting a loan. All loan giving agencies and banks have different terms and conditions associated with their loan options. So please be sure to read and understand those terms before you apply.
Now what are the things to look out for when applying for loan and how can you be a smart and better borrower this new year.
LOAN OPTIONS THINGS TO CONSIDER BEFORE GETTING A LOAN
- The Interest Rate
- Term or Tenor of the loan
- Total Household Income
- Confirm your expenses
- Available Savings
- Conditions Attached to the Loan
1. The Interest Rate:
Loan interest rate is related to how much you will pay back at the end of the loan tenor. It is very important that you consider a loan with a low interest rate as these are usually the easiest to pay.
To be sincere, the longer the term of your loan the bigger the interest rate and vice versa. This means that if you borrow $2,000 to pay back in one year the interest rate will be relatively small. But if you borrow that same money to pay back in 10 years time the interest will be relatively high.
Note that interest rates varies from one lender to another. Which means that two banks are most likely to have two different interest rate on same amount of loan borrowed. So look for the best one that is available and go with that one.
2. Term or Tenor of the loan:
This means how long before you payback the loan. Some lenders are reasonable and allows you to payback over a period of years. But in some cases it is different. Here you have to consider if you will be able to pay back the loan within the set date else you’ll have to pay for some extra charges as stipulated in the loan agreement.
3. Total Household Income:
By Total household income we mean how much money the house is receiving every month. This is where your planning starts from as you don’t want to borrow more than you can afford to pay back.
Before you apply for a loan, get to know how much you earn, how much your spouse earns, how much the family business brings in(if there is any). Once this is done you can now move to the next stage which is confirming your expenses.
4. Confirm your expenses:
This is another very important aspect of what you should think about before applying for a major loan. Here you deduct your expenses from your income and know how much is left.
For example, your household income is $20,000 monthly. Take note of the monthly expenses of the following, Gas, feeding, clothing, house rent(where applicable), tax, electricity bills, shopping etc. Now remove the amount of expenses from the income above and see how much is left. Its good you do this to enable you plan better.
5. Available Savings:
Ever heard of the phrase/sentence “save for the rainy days”?. Literally this means that you keep some money aside for emergencies. After removing your expenses from the income above, you can now keep some aside for emergencies and other related stuff.
Having savings will also help pay for loan if income is not enough. So it is very vital that you keep something aside before you apply for a loan.
6. Conditions Attached To The Loan:
Gladly most loan conditions are favorable. But it is still very vital that you double check before you put a pen to any agreement or tick the “i have read the terms and conditions” button online.
Note that not all lenders have same terms and conditions and also note that a condition that is suitable for your friend might not be suitable for you. Look for the one that will work for you.
There are lots of loan options available online and you might just find the right one for you. But keep in minds the practices above so as not to keep yourself into more debt.
If not properly considered loan options which was meant to help you might just put you into more trouble than you are prepared for.