4 Loan Facts You Need to Understand Before Applying for a Loan – What to KnowMar 05, 2020
You must understand how loans work before you consider borrowing an amount from a bank or a financial institution. This will help you save money, and your understanding of how loans work will help you make better decisions about debts. It’s not always easy, and some loans will leave you bankrupt if you run out of means to pay them back. You should avoid that part.
In this article, we list down four things that you need to think about before applying for a loan.
Understand the cost of money
By now, you should have an understanding that to get money, you need to have more money. This is how banks and financial institutions make money from your loans. When you borrow money, you have to pay the money back, including its interest, and some accompanying fees.
When you take on a loan, you should try to minimise the cost. However, this part is tricky because most lenders don’t try to explain how much the loan that you applied for will cost. That’s why before applying for one, you should run the number yourself.
You need to calculate the loan payments and the accompanying costs. Doing so will reveal whether you’re capable of paying the amount or not. You can use a spreadsheet to see what happens when you change the numbers. Consider the interest rates much more carefully.
You’re paying for the loan and the interest
To understand this better, you can seek the help of an amortisation table. This tool schedules the list of the monthly payment you have to make. It will also show how much goes to the actual loan, and how much goes to the interest. The tool will help you understand how loans work.
Some loans don’t have a “term,” while some loans do. Some loans are paid in 30 years, while others have to be paid in three years. When you look at credit cards, they don’t work like a personal loan. However, they are loans and called “revolving” because you’re allowed to loan and re-loan every time you want.
If you’re beginning to be confused about how loans are paid, get the help of an amortisation table. It can reveal how much you’re going to have to pay as balance and interest every time you change the variables.
Not all loan applications will be approved
One primary factor that vendors look is a borrower’s capacity to pay. Do you have an income? Can you offer collateral in any event that you won’t be able to pay off the loan? Do you have pre-existing records that show you don’t pay on time or that you have pre-existing loans? Lenders won’t give out the loan if they know you can’t afford to pay. You must prove to them that you can pay a loan off.
Understand how loans work in everyday life
When you want or need to borrow money, you need to go to a bank or a financial institution. Look for a lending officer who can accommodate you. Provide information about yourself and your capacity to pay. The lender will then evaluate your application.
With the speed that these lenders are competing, most loan applications will be approved within a day. That means, if you go to a bank or a financial institution at 8 a.m., they will approve your loan by 12 noon. Before the day ends, you’ll be able to carry the cash with you. Shortly after this, you have to start paying it off every month.
One more thing…
If you want to repay your loan fast, you can use methods that will speed it up. Some lenders will allow early repayment, and some don’t. Go to moneylenders who can accommodate your requests without a hitch. After all, you’ll be the one making sacrifices to pay it off.
If you’re looking for instant loans in South Africa, get in touch with us today to see how we can help.