Applying for a loan is something that should ideally be done after putting some thought into it.
It should be done after doing some research into the procedure, the criteria as well as after asking important questions.
What are some important questions to ask when applying for a loan?
Does it make sense?
Determine if it’s the right financial tool for your needs. You may think that you need a loan, but you need to ask yourself if you really do.
You may think that you need to apply for a personal loan, when a credit card may be a better option. Be sure to seek the advice of a financial expert if necessary. This will help to save you money in the long run. Instead of having to pay exorbitant interest rate fees for a personal loan you may not have needed, you could rather save money towards a particular goal.
You should also ask yourself whether the best type of loan secured or unsecured. You’ll need to consider if you have collateral or not.
How much do I need?
This might just be one of the most important questions to ask before applying for a loan. Figure out exactly how much you need to borrow.
The amount you apply for will determine how much money you ultimately spend. If you are applying for a loan for home renovation purposes, you need to work out the exact costs. You wouldn’t want to spend the loan in other ways, other than what you have said the application is for.
What is my credit score?
It’s a compilation of information about how you handle debt and is maintained by credit bureaus. The Credit Bureau compiles your credit record based on information provided by your creditor(s).
As a consumer you are entitled to one free credit report annually. Your credit information must be retained by the credit bureau for a defined period of time.
It’s essentially a detailed record of all your credit agreements that shows how you handle your monthly repayments. This information will affect your ability to get more credit, so lenders assess this when you apply. You need to know what your score is, so that if it is too low, you can work on improving it.
As a consumer, you have the right to correct any discrepancies you may come across in your credit report. Credit bureaus have twenty business days to resolve any dispute that you lodge. No business entity should access your credit report.
How much will the monthly payment be?
When you assess you affordability, you will become aware of how much money you have to spend monthly. This will help you work out if you can afford to pay the monthly repayments or not. Make sure that you borrow what you can afford to repay.
Use a loan calculator if necessary and consider different factors that will affect your loan payment.
How much interest will you be paying?
A higher interest rate means that more interest will be paid in the long run. So you need to find ways of improving your creditworthiness and general risk so you can lower the interest charged.
Do I have a budget and a plan?
Along with having a loan comes the responsibility of repaying it on time, so it’s important that you have a clear plan for how you’ll do this. Having a budget in place makes this much easier.