How do I know I’m choosing the right loan?
It’s a very good question, and one that you can’t, or rather, shouldn’t answer in a hurry.
There is a multitude of reasons why an individual such as yourself would need a financial loan. The trick is to identify the exact purposes of the loan and make sure that you’re signing up for the ideal solution to suit your financial needs.
This is a very important decision, it’s wise to ask yourself a few more questions which will ultimately determine the answer you’re after – what is the best loan for my particular scenario?
How much money do I really need?
Okay, so, this is the first and foremost question you need to know the answer to. Oftentimes people will go over the amount that they need and then get a bit greedy by adding a couple of zeros to the end of the number. Don’t be that person.
Work out a true figure of what you actually need in order to solve, cover or pay for the cost you are taking the loan out for. Too little or too much could land up flagging you with the lender as someone who just isn’t that serious about the loan being approved in the first place. They will take a lot into account and the nature of your loan, along with the attitude towards the process is high on the list of contributing factors when choosing to assist you with a loan. Avoid appearing as a risk to your potential lender.
It’s a good idea to apply for a little extra over the amount you need, in the event that there are hiccups in the amount. Having a little extra could come in handy and should be fairly considered. One of the main things to be wary of is taking on an amount that you cannot afford to pay monthly. Poor cash flow can sink a business and zero disposable income can land an individual in serious debt.
What costs are involved?
There’s no point in signing on the dotted line just to get money, you need to read the fine print and see how much you have to pay your lender in order to get it! You might have worked out the loan amount divided over the time period you have to pay it back and under the impression that you can afford the repayment with ease. Once you add the admin fee, the interest and other charges to it, you might yourself be faced with a figure you aren’t really cut out to afford!
Don’t get caught with this simple step, ask the right questions, and read through the legal stuff, there are always going to be fees and interest rates involved. It’s best you understand what you’re getting into before you agree.
How long do I have to settle the loan?
This all depends on which lender you use and what agreement you come to. The type of loan will also have a determining factor in the time given to pay it back. If it’s a bank, better yet your own bank, then you are quite likely to get a better repayment term. If, however, you choose a private lender that you have not dealt with before then you may be paying a higher interest rate at less favourable terms.
It’s important to understand how interest works on a loan, and the longer the loan term, the more interest you will pay, ergo the larger your total loan amount will be. However, the longer the term, the smaller the monthly repayments will be and the interest rate is likely to be lower as well in this case, which is good to know.
Make sure you find out if you can repay the loan earlier than agreed upon and what fees and penalties may be involved in repaying the loan amount early.
Lastly, and most certainly not least, ask yourself “Why do I need this loan?”
This question, in theory, should actually serve as the first question. It’s certainly the question that upon reaching the answer, will determine your consequential steps.
The reason it’s important to figure this answer out is due to many reasons. One of them is that should you be throwing money at a symptom and not a cause of the financial problem, you’ll most likely end up having to take out another loan in the near future.
This might help in the short term to solve the financial crisis you’re faced with, however, it would behove you to solve the root cause of the financial strain and hopefully, then your cash flow will be safe and your finances can be well managed.
Is this lump sum to assist a short-term problem or meet a short-term need? Then it’s a good idea to shop for a loan that will suit that scenario, such as a Boodle loan, a payday loan or a short-term loan.
Is this loan to assist with a long-term project or finance a vehicle or start-up business? Then inquire about good interest rates, service and favourable repayment terms before choosing the loan and lender you are going to use.
There are dozens of loan types available to any South African citizen that wishes to take out a loan, provided they are of legal age and meet certain criteria. All you need to do is work through this list of questions and get ready to sign up for the best loan for your financial requirements.
If you have found the best loan option for you. Do your research, acquire the information you need to get started and as soon as you possess the confidence to go ahead, go get your loan!