3 Questions to Ask Before Getting a Personal Loan
When you come home from work and suddenly notice that the ceiling on your porch is actually hanging because of old wood falling off, it is a sign that your house is asking to be fixed.
Like any other house repairs, they often come at a time where the cost is too much to be using your savings and emergency funds. One good option is to get a personal loan that can help you finance the repairs of your humble home.
Personal loans are effective ways of generating money that can be used to finance large amount of expenditures where the cost would then be spread through out a period. These personal loans are often offered by banks but are also available through your licensed neighborhood lender. But before you take on a loan, here are 3 questions you have to ask to ensure that you don’t get in trouble.
- Do I have a specific use for my loan?
First thing you would have to identify is to know if you have a specific use for the proceeds. Identifying a specific use can help you avoid spending the money for things that won’t be giving you that much benefit in contrast to the expenses incurred for getting the loan.
- Do I have a plan on how to pay off the debt?
Of course, you will need to identify where you will get the income to be used in paying off the loan. Without identifying the income needed, you will be working hard to find the means to pay for your loan which is going to be a real struggle. Knowing where your income will come from to pay off your loan allows you to budget properly.
- How much will I pay for my personal loan in total?
This is important as it will help you identify the total cost of your loan. This will give you an idea of any other action you need to take such as planning of repaying your loan at an earlier date if you are capable of doing it. Do not ever underestimate the power of knowing your numbers as it will help you with a lot of decisions about the loan that you need to make.
3 Things To Consider When Getting a Personal Loan
A personal loan is one way of generating funds that you need for a project, emergency or purchasing something of value. Personal loans are being offered by banks but are now being offered by licensed lenders as well. It is the most flexible type of loan since the borrower can use the proceeds without any restriction on where to spend it on.
But it is also important that we watch out for personal loans as they can lead us into debt that may be difficult to manage. It is important to inform ourselves of how a personal loan works and know what things we should watch out for. Here are a few things you need to consider when getting a personal loan.
- Use personal loans for a specific goal.
When getting a personal loan, it is important that we have a specific use for the proceeds or a specific goal that getting a loan should achieve. Identifying a goal for your loan allows you to maximize what you need to borrow and how much you should borrow. Remember that borrowing money from a legal money lender in singapore like cash mart creates cost through interest payments. Identifying your loan would help you maximize your funding while minimizing the cost.
- Interest rates of personal loans can either be variable or fixed.
Personal loans have different means of computing the interest payment. It can be computed through a fixed rate where the rate used will be applied throughout the loan period. This is more advantageous for loans with long payment periods. For shorter periods, having a variable rate applied to the personal loan is much more convenient.
- Personal loans can either be secured or unsecured.
Most personal loans that are being offered by banks and lenders are unsecured but there are a few banks and lenders that require a collateral. Personal loans are often unsecured and offer a higher interest rate compared to secured personal loans. The reason for this is for the lender or bank to recover the principal at a faster time frame to minimize risk of recovery. Secured loans have lower interest rate since the lender puts a lien over the secured asset to be used to recover the principal in case of borrower’s default.
Why Personal Loans Get Rejected
You have found that one side of your house has been infested by termites. You know that you can’t keep it that way for long as the rainy season is about to come in within a few weeks and getting it repaired is quite necessary. But being short with cash in your savings, you decide to get a personal loan that can actually help you with the repair. The only question is will you get approved?
- Bad Credit Score. Sometimes, this can be a sole reason for the bank or lender to reject your application. A bad credit score can mean a lot of things to a lender. It can reflect how you handle debt and how you deal with credit. It is very important that you make sure your credit score is good.
- Insufficient Income. One of the reason that a personal loan can be rejected is having insufficient income coming in monthly. This definitely alarms the lender or the bank as it means that you will have difficulty in paying off your debt.
- Having too many loans. It is important to note that a lender will always look for existing loans as well. The reason for this is that they need to estimate your capacity to pay. You may have a good income reflected in your pay slip but it may not be enough because you are paying off other fast loans.
- Inconsistent Information. When completing application forms and indicating other details in your application needs to be consistent with your submitted requirements. If your information is not consistent, then it becomes a problem for the lender on which information is true. Some lenders can be strict by rejecting the application straightforward.
- Falsified Documents. You need to make sure that the documents you submit is true. Any document or requirement that is proven to be falsified automatically renders the application rejected. To top it off, your name can be submitted to a database who submit fraudulent accounts.