Sometimes, you experience financial difficulties from medical emergencies, tuition fees for your kids, home repairs, or fulfilling your dream vacation. While you have the opportunity to borrow from lending institutions, banks, or even an individual, it is essential to be careful and study all factors regarding the loan offer.
Before making any arrangement with a particular lending partner, check out below questions you can ask to ensure a proper outcome.
1. How Much do I Need?
The first question to ask yourself is – Do I need a significant loan amount? You better ask yourself that question. Always think that an immense Principal amount will lead to enormous Interest and penalty charges.
Always remember the reason why you are getting a personal loan.
Only borrow the necessary amount. If you only need 1000 bucks, apply for 1000 bucks only. Borrow within your means or your capacity to pay.
2. What are the Interest Rate and Penalty Rate?
Interest Rate and the Penalty Rate is one of the most significant considerations when applying for a personal Loan.
Some Institutions give a lower interest rate but impose a high penalty rate. On the other hand, some companies give a higher interest rate and lower penalty rate. If you fail to pay a loan amortization on time, penalty charges will occur and may be a cumbersome burden on your end.
By weighing both the Interest rate and Penalty Rate, it will prevent you from worrying about how to pay.
3. Which Term should I Choose?
Short-term loans usually offer 3, 6, 9, or even 12 months payment terms, while long-term loans are payable in years.
Always remember that the Loan Terms affect your amortization repayment schedule. A shorter term will lead to a higher repayment, while a long-term loan will lead to a lower repayment schedule.
Assess whether you can pay in a shorter or longer term.
4. Am I Capable of Paying?
Do I have the capacity to pay for it? If not, refrain from indulging yourself in getting a personal loan.
Failure to assess your capacity to pay will give you financial difficulties in the future. Check how much your monthly income is, compute your expenses and other spending and see if there will be an extra amount that you can allocate to repay the loan. You can also build a side hustle to finance your needs or loan if there’s none.
5. What Type of Personal Loan must I Avail?
Personal Loans are classified into Secured loans and Unsecured loans.
A Secured loan is when personal property is offered as collateral. They will not require you for a good credit history. You only need to declare a property. On the other hand, an Unsecured Loan requires a well-established credit score. In short, no collateral or personal property is necessary.
Ready to Apply for a Loan?
While initial loan applications might take a little time and questioning, it is all worth it. Understanding your loan allows you to build a good credit score and peace of mind.
If you’re ready to apply for a loan, contact Par Pahiram, and we’re happy to help.
