Loan advice for beginners
Obtaining a loan approved is not an easy procedure. Often lenders screen the loan applicants more carefully and strictly. Therefore borrowers need to follow some advice to ensure the bank loan is processed without any problems.
Looking for Best Options
Firstly, decide what type of loan you need to apply. Approach a friend or family friend and make a request. If this fails, apply for a loan from a bank or financial institution or apply for a loan from online lending institutions.
Taking a loan is a risk until it is settled. A borrower has to evaluate whether the loan could be paid off comfortably. The current income and employment history and other personal assets can indicate the ability to settle the outstanding debt.
When applying for a secured loan or credit card ensure to have a secured product as a monetary deposit. The value of this deposit will be evaluated and any existing debt secured by that deposit will be deducted from the value. The balance will be considered for the lending decision.
Carefully decide the purpose of taking a loan and how the money is planned to be used.
Read the Contract Carefully
A loan contract is a complicated document which is an agreement with a bank or financial institution required to be signed by a borrower to get the money needed. Most people regard this document as a sheer formality and overlook most contents in this elongated agreement.
Therefore, reading carefully and accepting the clauses in a loan agreement is very important. Since a loan agreement is drafted by the lender it is vital for the borrower to be cautious of different clauses in the agreement to prevent disputes in the future.
It is advisable to request for a draft copy of the agreement and go through the terms and conditions before signing the original.
Repaying on Time
Settling an instalment of a loan early is very unlikely to affect your credit score. However, paying the instalments through the term of the loan indicates that a person is able to manage and maintain an account responsibly over a period of time, which is a plus point for your credit score.
Repaying a personal loan on time is a good idea as it helps to cut interest cost and avoid wasting money. Therefore, check the agreement for any clause on a penalty for paying off the loan early.
Most lenders make their money from the interest component and early repayment deprives them of this earning. In some instances, banks and financial institutions charge a fee from borrowers who pay off their loans early.
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