There could be a variety of reasons as to why you need a loan. Maybe you’ve just had a baby and now that your family is bigger, you need a bigger home. Or you could be looking to upgrade your car and don’t have the full amount you need.
Whatever the reason may be, you’ll have to make an informed and calculated decision. To help, we’ll take you through a step-by-step approach on how you can go about applying for a loan.
1. Assess your financial position
First and foremost, you need to take stock of your current finances. Take a look at your bank statements from the past few months and figure out where your money is going. See how much you spend on essentials and entertainment or recreation. You may be spending money unnecessarily at some places and it’s better to get a handle on such habits before you get a loan.
2. Plan your budget
Sit down and make a formal budget for the month. By seeing how much money you have, how much you need to spend on essentials, and how much you have leftover, you’ll be able to judge if the savings are enough to be able to pay a monthly installment. If your savings just reach the mark, then it might not be a good idea to commit to a legally binding monthly payment plan.
3. Research your options
If your budget lets you comfortably afford a monthly
Check which arrangements work for you and if you’re comfortable with the interest rates and the term of the loans. With banks, credit companies, and private lenders, there are more than enough options out there which will fit for you.
4. Check your credit rating
Before going to see your lender, it would be best to check your credit rating with your local credit bureau. The lower your credit rating, the higher the interest rate you’re likely to get on your loan. So make sure you do whatever you can to improve on your rating.
5. Contact your lender
When you’ve sorted out your credit rating, it’s time to see your lender. Ask whatever questions you have and thoroughly understand the arrangement before you sign anything. Understand what would constitute a “default event” and the consequences and options available if you default on your payment.
Some fees do not apply unless a certain event takes place, so be sure to ask about both “charged” and “applicable” fees. One example is an early repayment fee, where your lender will charge you money if you are able, and choose, to pay your loan early. In fact, to be on the safe side just read through the entire agreement!
