The stories of loan sharks running after an individual, banks re-possessing properties and assets, as well as simply having a bad credit standing is enough to scare someone from applying for a loan. However, in this day and age, there are a lot of ways to be a responsible borrower and pay off your loans on time without actually having to get another loan just to do so.
The secret is proper preparation before getting one. Deciding whether to go to family, friends, a bank, or a moneylender here in Singapore is crucial. But before you make such decisions, answering important questions can help you determine whether or not it is right for you to take one in the first place.
Questions to answer before taking a loan
Why do you need the loan for?
People apply for a loan for a lot of reasons. Some use it to cover medical bills; others use it to fund a business or their home renovation. Understanding why you need a loan and how you will use it can help you better determine the amount and kind of loan you need.
How much do you need?
No one knows precisely how much money he would need, especially when it is used to fund a project or a business. But thoroughly educating yourself about the field that you are getting into can help you have a more accurate estimate of the amount that you would need to borrow.
Aside from having a figure in mind, knowing and having means to pay for them is also a factor to consider.
What is your current financial status?
Are you drowning deep down in debt? Is this your first time getting a loan? Did you just lose your job? Or are you secured with your career and position? Answering these questions can help you have a better understanding of your current financial status.
As mentioned in the second point, your current financial status and stability can help you know the kind of loan you need.
How long do you plan to pay the loan?
Generally, the longer you pay the loan, the larger the overall interest you would have to pay. The shorter the amount of time you need to pay for the loan, the lesser the overall interest rate would be. There is no right or wrong way to pay for a loan as long as you pay it on time.
What are the policies of the loan?
Before signing the deal, it is always necessary to understand the policies of the loan. Knowing whether or not you can pay ahead, pay more than what is agreed upon, as well as the penalties that you would incur should you fail to pay on time are just some of the things that you should clearly understand before entering the deal.
Taking a loan is a personal decision and is something that only you can fully decide upon. But answering these questions can help you have a better picture of what you are getting into.