Times are hard during this Covid19 pandemic. People lost jobs or business and worse, loved ones. Still, life has to go on. Utility bills pile up, there are school fees to pay and daily expenses to consider. All these put a strain on our finances and if savings are already depleted, we always consider borrowing money.
I’ve also been in this situation and I’ve learned my lessons from bad decisions in the past. If you’re considering to borrow money, here are five things you should know first.
1. Know your need
Before borrowing, know the amount you need first. Then ask yourself if borrowing money is the only solution to your financial problem. There may be something you can sell that can provide you with cash. Consider looking at the things you own that you no longer use. There may be people who will pay for it. Consider decluttering and selling the stuff you no longer use but other people need. Join online buy and sell groups and look at the things people are looking for.
2. Know your capacity to pay
Before applying for a loan, you should think about how much you can afford to pay and how you will pay for your loan. Are you expecting to go back to work soon or have assistance in paying for the loan? Don’t bite off more than you can chew. Don’t apply for a loan if you are not sure you are going to pay it back on time. Otherwise, you’re only digging yourself deeper into debt. If you have an existing loan from different lending institution, you may consider consolidating your debts for better terms and easier monitoring.
To have extra, there are a lot of online income opportunities nowadays. You can open a home-business, be a virtual assistant or writer. Physical work opportunities may have contracted this pandemic but a lot of online opportunities opened up.
3. Know your credit rating
Before applying for a loan, know your credit rating. Have you taken out a loan before but failed to pay on time? Or you have a credit card you weren’t able to pay off? Every time you take out a loan, you are risking your credit score of rating if you can’t pay your loan on time. This will have an impact on your future financial transactions. It can affect your ability to get future loans like a housing loan so always take care of your credit rating.
4. Know the lending institution you wish to borrow from
There are a lot lending institutions offering personal loans now knowing that a lot of people will be needing it in this pandemic. Be very careful in which institution you’re going to apply for a loan. Choose the bank or lending institutions with a good reputation. Check whether the company has the appropriate licenses and also check customer reviews. We hear stories of borrowers being harassed by lending institutions for late payments. You don’t want that to add to your worries.
5. Know the loan terms
Know the loan terms first before signing any contract. Oftentimes we go for the ones where we get approve the fastest without considering the loan terms. Make sure you know the interest rate, available terms, additional charges, and other pertinent terms in the loan contract. Shop around and look for the one with the best terms and the most trustworthy lender.