Before borrowing wisely consider why you want the money and how you are going to repay back. Borrowing if done prudently makes someone better in the long run. Loan are useful in many areas including education, property acquisition, and medical among others. Below are five considerations
1. The purpose of the loan?
When borrowing, you not only have to return the money, with the interest. Loans should be reasons that in the long run would yield good returns.
2. Can you repay the loan?
When going for a loan, come up with a budget and list your monthly expenses, savings and debt in detail. Work out to see if you can afford to repay each month. Choose a payment method that best suits your situations and ensure you repay the loan in the shortest period possible – the longer you take to repay, the huge the interest.
3. Is the financial institution reliable and reputable?
Be cautious with offers that sound too good to be true as these might be some of the usual tricks used in loan intermediary scams. Always approach financial institutions reputable banks when looking for loans. Compare rates, terms and conditions before making final decision.
4. What is the Annual Percentage Rate (APR) of the loan?
There are various commonly used basis on which interest is calculated in the market such as annual rate or monthly flat rate for personal instalment loans and daily or monthly compound rate for credit card outstanding balances. As well, there may be other fees that you have to pay, such as annual charges and handling fees. Notably, you should consider all fees and interest rates before agreeing to a loan.
All lenders should state and calculate the APR of their personal loans and include the basic interest rate, as well as all other fees related to a loan. Use APR to compare the actual costs of different loan products.
5. What happens if you fail to repay loan or make late payments?
If you fail to repay your loan credit report will affected if you fail to repay your loans or if you are make late payments. A poor credit history will also impact negatively your work life and promotion chances in some sectors such as financial sectors, armed forces, regulatory bodies among others.
Extreme borrowing may have serious implications on your financial health resulting to stress. If you borrow to cover existing debts, financial situation spirals out of control.
By Joseph Mambili
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