Looking forward to apply for a loan? Before you apply for a loan, it is important for yourself to figure out some points which are crucial to consider; just so you do not end up being perplexed on the same later.
After all, if you are looking forward to buy smart phone, isn’t it obvious that you’ll consider all the specifications and features that match the standards of the quote stated? It is on the basis of these factors that leave you to decide on whether to buy the phone in the given budget or not.
Here are few points that you should consider before applying for a Loan:
1. What is the purpose of your loan and how much amount do you actually need?
Have a clear idea with respect to the purpose of your loan and how much amount you will need.
The purpose of the loan – do you really need it in the first place should be the chief consideration along with the loan amount that you’ll be borrowing. The amount that you’ll be borrowing will also be proportional to the subsequent question of how much you can actually afford to repay your loan later. Greater the amount, the higher your monthly installments payments will be. You’ll need to do your homework of how much you’ll be left after paying the bills by reviewing your budget and cash flow on monthly basis.
2. How long will you be repaying this personal loan?
It is necessary to plan out for how long (in terms of years) you’ll be repaying the debt amount.
If your principle concern is to keep the overall costs low, then opt for personal loans with shorter terms, where you can get your debt cleared in a faster manner. Your monthly payments will directly decide the length of period of loan repayment.
3. Are you qualified for the Loan?
David Gass, a business consultant and CEO of Anderson Business Advisors says “If you get declined for a personal credit card, it makes it more difficult to borrow in the future.” In a similar fashion, if you apply for the loan that you won’t get in the future, you’ll simply hurt your credit. If you are declined to take loan and move on to the next bank, it will look like you’re a risk. For this purpose, it is necessary to know your documentations well, along with lending instructions, specific requirements, eligibility criteria, cash-flow and other qualifying factors. It is necessary to study all these aspects before approaching for a loan application.
4. Is the Loan sustainable for you?
If you are opting for repayments over a longer period of time, lower amount of repayments ensures sustainability and avoids financial hardships. In this way, the budget can be made stable as much as possible.
5. Do you have adequate cash flow to repay the loan?
The banker might ask you for financial projections. You just have to make sure to include your debt repayment plan in those projections.
Bankers usually seek for some extra cash flow, and you may need to show available cash flow that’s three times greater than your debt payment requirements.
Before applying for loan of any kinds, pause for a moment and ask yourself these five questions. If you are able to answer them confidently in a satisfactory and positive manner, go ahead for loan application!