Taking a financial loan from a bank or any other financial institution is not an odd thing. In fact most people ranging from low income earners to billionaires and even governments borrow money. However, these loans often come with a lot of terms and conditions that are often complex.
Most prominent people and unknown ones have lost their assets to the lenders just because one failed to take into account several factors before borrowing. Therefore here below are some key points one should consider before taking a loan.
High interest rates
Be cautious of loans with high-interest rates, as they can lead to a debt trap. This is the first thing you should take into account. Do not simply ask to take the loan because you’re in dire needed of money. You will prefer a loan with favorable terms that won’t take a toll on you when it comes to paying back.
Hidden fees
Understand all the fees associated with the loan, including origination fees, late payment fees, and prepayment penalties. If you cannot read or can’t understand some of the clauses in this loan, it’s preferable you go with someone who has prior financial knowledge. They will elaborate to you what this loan entails that you might not be able to spot yourself.
Unclear loan terms
Ensure you understand the loan agreement, including the repayment schedule, interest rate, and any penalties. Do not rush to accept and sign, read the terms and conditions. The financial institutions are simply selling a product to you and won’t go into the full details for you. It’s therefore upon you to look out for yourself. Ask for answers where you have not understood because at the end of the day, the burden to shoulder these unclear terms falls upon you.
Avoid Over borrowing
Only borrow what you need, as excessive borrowing can lead to financial strain. Often times we borrow money to offset our personal problems but most times its for investment and to create capita. A heavy loan is not advisable is regardless of the use.
It’s hard to predict the trends of businesses and therefore what you initially intended to invest in might not return the gains imminently or forever. Therefore, borrow what you can ably pay back without straining you and your already made resources.
Avoid Unreliable Money lenders
Research the lender and ensure they are reputable and trustworthy. There are currently a lot of money lenders and some of these are unscrupulous. They will make sure you fail the terms and conditions so that they can confiscate your collateral security. Therefore, before you borrow from them, make sure they are legal and everything is written down and clearly understood.
 Not reading the fine print
Carefully review the loan agreement before signing to avoid any surprises. Do not let your dislike of reading lengthy documents land you into problems. A financial loan is something that you shouldn’t mess with. Leave no stone unturned while scrutinizing it. You don’t want to be surprised about the T/Cs after having already signed it.
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 Not having a repayment plan
Create a realistic repayment plan to avoid defaulting on the loan. Defaulting obviously leads to fines which weren’t art of your plans and this in turn throws you into unnecessary fees. Therefore, make sure that you draw up a realistic payment plan that favors you and helps you to honor your obligations.
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