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Taking a loan responsibly

by Staff Writer
11 Feb 2020 at 13:29hrs | Views
If you recently started working and have been doing well in your life, then you may be thinking of taking the next big step and buying your own car or house. If you are still studying, then you may be wondering how you can meet the fees for the upcoming semesters. A viable option is to apply for a loan. Now, you may be on the fence about this. Getting a loan has its risks since it leads to debt. However, when you do it carefully, applying for a loan and paying it off without being up to your ears in debt is achievable.

Instalment Loans

Debt is a significant obstacle to reaching your financial goals. When you do apply for a loan, quickly paying it off is a key to go on a path towards financial success. Applying for a responsible installment loan can help you stick to this path. You can pay off an instalment loan over a set period with regularly scheduled payments.

Payments are usually monthly or bi-weekly. The amount and the interest rates are also usually constant. You and the lender agree to the time, frequency of payments, and amount before proceeding with the loan. Since the fees are in increments, you can include the fees in your regular budget and gradually pay off the loan more easily.

What to Consider

When getting a responsible installation loan, there are things that you have to carefully consider. Always think about the purpose of the loan. You should only apply for loans for crucial payments such as education or medical fees. Never use a loan to manage existing debts since this can aggravate your problems.

Another consideration is your capability to pay off the loan. Yes, paying off instalment loans is more doable, but you still need a stable source of funds from which you can allocate some for your loan payment. In case you are unable to pay on time, you need to be at least able to manage the penalties. The penalties also include paying off the loan ahead of the agreed term because, as silly as it may sound, there can be an additional fee if you pay off a loan before its term.

Loan terms are, of course, crucial aspects you need to consider. These should be manageable for you. If you cannot pay off the loan within 12 months, go for longer durations. Instalment loans for mortgages can extend for 30 years.  It is common for loans with long repayment periods to also have lower interest rates. However, the loan terms, as well as the interest rates, are primarily based on your credit.

If you have a better credit score, it can land you better conditions and lower interest rates. Fortunately, even if you have an unfavourable credit score, you can still apply for an instalment loan. Many lenders have other criteria besides your credit score. You can show other documents, such as income and employment history to serve as other determining factors for credit rating.

The Bottomline

A responsible instalment loan can be a useful tool to get you through a sticky financial situation. The flexible repayment terms also allow you to manage your finances without being smothered in debt. Just like with any loans, always make sure you wholeheartedly understand the terms before agreeing to them. Having a good history with paying off loans not only gives you better credit history but also keeps you on track for financial success.

Source - Byo24News