If you need cash, especially if the need is immediate, you would need to take out a loan. If you have a good credit score, banks and lenders will easily approve you. There are even banks and lending companies that will offer money-lending services to people with a decent credit score. However, you shouldn’t jump the gun just yet. There are things that you should know about loans before you apply for one.
Are You Eligible For A Loan?
Before we start going through the five things you need to know about loans, let’s try and figure out if you’re eligible for one. Your eligibility for a loan varies. It may depend on:
- What kind of loan you’ll be getting
- How much money you’ll be borrowing
- Type of lender you’re borrowing it from
- Your credit score
- Your income
- Your age
- Your financial stability
Aside from these requirements, there are also documents that you need to compile. You may need to compile:
- KYC Certificates
- Tax Returns
- Salary slips
- Proof of collateral
Do you think you’re eligible to file for a loan?
Five Things You Need To Know About Loans
If you’re eligible for a loan, then here are things that you should know and remember about loans.
- Loans are Easy and Convenient
As we have stated above, the amount of your loan depends on different factors. It’s been given that the better your credit score is and the higher your income is, the amount that you can borrow would be bigger. This makes loans pretty easy to apply for.
There are a couple of lenders and banks that set a limit on the amount that you can borrow. However, 99% of the time, the limit that they’ve set would be enough for your needs. This makes loans convenient, especially for people who are in immediate need of cash. You’ll have the amount that you need without having to resort to liquidating your assets.
- Loans Usually Have Fixed Interest Rates
Money lenders and banks, unlike loan sharks, offer an interest rate that’s locked. This means that your loan’s interest rate would stay the same until you’ve paid it off. To make it even better, if your credit score is good, you can ask for a lower interest rate.
You have to be wary when applying for a loan since not all financial institutions are the same. There are institutions that will give you a low but floating interest rate. This might be tempting. However, if the market blows out, the low interest rate might suddenly increase.
- Loans Have A Fixed Repayment Period
Whether you apply for personal loans or business loans, the period of repayment is always fixed. The term would vary from the amount that you’ll borrow and who you’ll borrow it from. There are times when the lender would charge you more even with a short term.
Some lending companies and lenders have recently made adjustments with terms. If you have enough amount to pay all of your loan off, they may allow prepayment. Prepayments will allow you to have a reduced tenure. Look for a lender who would let you prepay your loan without an extra charge.
- Loans Have Other Charges
There are other charges that come with your loan. They may lessen the amount that you’ll receive or add up to your monthly payment.
One of these other charges is the processing fee. It’s charge after your loan has been approved. Another extra charge is the prepayment penalty. This is the amount that you’ll have to pay when you pay your loan off early. There’s also a tendency that you may be charged for the documentations.
When applying for a loan, make sure that the lender or bank is transparent. If you’re unsure, ask them if they have hidden charges and what are those for.
- Potential Risks
If you borrow money through your credit card, you’ll paying your debt off in an unprecedented term. With loans, the term is fixed. This may be helpful, however, it’s a double edge sword, since you may end up in trouble.
If you don’t pay your loan in time, your lender may file a lawsuit against you. You may also end up getting blacklisted, which means that you may have difficulties getting a loan again.
Knowledge is Power
Taking time to learn about loans can give you significant help. Borrowing loans, may it be personal loans or business loans, are a great way to boost you financially. If you’re thinking of getting a loan soon, don’t just depend on what money lenders tell you. Understand the five things you need to know about loans. Be a smart borrower.