Taking out a loan is a serious matter, yet some people do it like it’s no more important than deciding what to have for dinner. Taking out a loan can affect you in many ways, so it’s essential you get the answer to some questions first. Ask these 8 questions before going ahead with it:
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What is My Credit Score?
You need to know your credit score so you can determine whether you’ll be eligible for a loan at all. People with bad credit scores rarely get accepted for loans, as they are deemed to be risky. If you have a good credit score, you have way more chance of qualifying for this loan.
Do I Stand a Chance of Qualifying for This Loan?
Seriously consider where you are taking the loan out and why to determine if you’ll stand a chance of qualifying for the loan. If you aren’t a good candidate but apply anyway, you will make your credit score worse than it is already.
How Much Money Do I Need?
If you absolutely must take out this loan, think carefully about how much money you need. You probably think it’s better to take out less, but in some cases it’s better to take out more. This is because your interest rates can dramatically reduce, meaning you actually pay less back over the course of the loan term!
Is My Cash Flow Substantial Enough to Pay it Back?
You need to have good cash flow to make sure you can pay back the loan in the right time. If you’re struggling for money then it’s probably a good idea to stay away from loans.
Will I Get Charged for Paying Off the Loan Early?
In some cases, you may be able to pay off your loan early. You could inherit some money or even win some. Whatever the case, you’ll probably want to become debt free as soon as possible. Bear in mind that some companies will charge you a fee for paying the loan off early. They were expecting all of that lovely interest from you and now they won’t get it, so this is their way of getting more money. Some companies won’t do this, so do your research.
What is the Term of this Loan?
The term of the loan is the amount of time you have to pay your loan back in. You should always be sure you can pay it back within this time. Some loans will take years to pay back, while others only weeks.
What Happens if I Can’t Pay?
If you can’t pay, the process varies from company to company. You need to know how you’ll be treated if you ‘default’. You might want to get debt management advice to help you.
What is the Interest Rate and is it Fixed?
You need to know the interest rate to know how much you’re paying back over the months and years. Fixed interest rates stay the same while flexible rates can go up.
Thanks for reading!