Sometimes a loan is essential or could help you with a big goal. Here are the tips to help you secure it!
Whether you require a loan for business or personal use, it is important that you approach the process with care. Loans can be beneficial when used correctly e.g. giving you the platform you need to get your life back on track, or helping you to set up your dream business.
Nevertheless, this will only be the case if you choose the right loan for you. With that being said, read on to discover some of the common mistakes you need to avoid when taking out a loan.
1. Applying for a Loan when you are Already in Debt
Let’s make this clear; a loan is only going to get you into further trouble if you are already in debt. There are very few circumstances whereby a loan is a good idea if you are experiencing financial trouble.
If you cannot pay the repayments, the cycle of debt will only get bigger and bigger. So, before you start making any applications, make sure you pay off all your existing debt first.
You can do this with a dedicated plan in place. Start with the biggest debt and work your way down.
2. Failing to Read the Terms and Conditions
Another common mistake made when applying for a loan is failing to read the terms and conditions carefully. You should read over them several times to ensure that you fully understand each and every word.
Many people get stung by hidden expenses and surprise charges because they have not taken the time to read the terms and conditions carefully.
Loans are serious business and debt eats up a considerable chunk of your finances if you aren’t careful. Know what you are signing before signing!
3. Choosing a Loan with an Unsuitable Repayment Schedule
There are so many loans available today, making it likely that there is one that is right for you. You should never choose a loan with an unsuitable repayment schedule.
If you are worried that you won’t be able to make the repayments on time, consider another option, or talk to the lending company about potentially spreading the repayments over a longer period or giving you a period of grace before the repayments kick in.
Never sign for a loan when you know you will struggle. The amount of the payments, the frequency, the day the payments come out can all be altered before you sign.
Take into consideration that if you find the repayment schedule difficult now, you will struggle if interest rates increase, and they will increase.
4. Not Factoring Changes
As mentioned, interest rates increase. Unless you lock in a rate, there are numerous ways in which your payments might change.
On top of interest increasing, your life might change drastically. When agreeing to a loan, take into consideration any potential changes in your life, planned or not.
For example, pregnancy, changing careers, income levels changing etc. What is happening in your life for the duration of the loan that you know of? What could happen and how can you plan for that.
Too often people get a loan and don’t think about what is happening in the future. Then all it takes is one change to derail all their finances.
5. Lying on your application
Don’t lie on your loan application, no matter the circumstance. You could find yourself in a lot of trouble.
Lenders are able to find out if you have been untruthful about your credit score or income. Plus, if you need to lie about this, it is a sign that you should not really be taking out a loan in the first place.
Lying helps no one and can seriously impact your finances down the track. Be honest when applying for a loan and with your life in general.