Human needs are unending but sadly the means of meeting them are limited. One of the major issues that everyone will encounter at one point or the other in their lives is financial inadequacy. When one is faced with a financial need but has insufficient funds to meet that need, the solution may lie in taking out a loan.
The most common loan that caters to personal financial need is consumer loan. This credit facility is provided to help individuals handle expenditures that their regular income cannot handle. It can be used to purchase a house, buy a car, pay medical bills, finance tertiary education or facilitate a capital intensive personal project. Click here for more details on what one can do with consumer loans.
Whatever the reason for taking out this credit, one of the things that people sometimes fail to do that gets them into trouble is to take out time to find the best option. In this article, we will share some tips on how to get the best consumer loan for you so stay with us.
Factors to Consider Before Applying for a Loan
Due to the ease of accessing this credit, many people just jump into credit agreements without counting the cost. This can be financially damaging especially if you fall into a debt hole because of high interest rates and other unfavourable terms and conditions. To avoid this dilemma, there are several factors to consider before taking the plunge. Find below some of these factors:-
Purpose of the Loan
You must determine the purpose for which you are taking out the credit. This will go a long way in helping you to take out the right facility. So for example, if you want money to finance tertiary education, you need to take out student and not personal loan. A personal loan will not be appropriate because of the timeline of repayment and other terms and conditions.
Timeline for Repayment
Whatever facility you decide to opt for, ensure that the timeline for repayment is convenient for you. If you enter into a credit agreement with a repayment duration that is too short, you may be unable to meet up with repayment.
Your Ability to Repay
The first thing that you need to consider before you sign up for any amount is your ability to repay and do so on time. No matter how much the lender is willing to offer you, never take any amount that you know you cannot comfortably repay.
Interest Rate
After you have looked at the issues that we discussed above, the next thing to look at is the interest rate of the options that are available. Interest rate is one of the major factors that affect how costly or inexpensive a loan will be. When looking for the best forbrukslån uten sikkerhet, which simply means best consumer loan without collateral, the major thing to look out for is the overall cost of the credit starting from the interest rate.
Fees and Charges Involved
You need to also find out all the fees and charges that are included in the loan. Take a holistic approach to estimating the cost of the facility; this means that you must calculate all the fees and charges that you have to pay on the facility.
The Reputation of the Lender
Before you apply for credit from any bank or financial institution, you must ensure that the lender is honest and straightforward. There are so many loan sharks who disguise as legitimate lenders. If you take out a loan from such businesses, you can endanger your life and wellbeing in the event that you do not meet up with the terms and conditions. Most often these loan sharks have very inhumane terms and conditions but sadly, desperation can blind applicants to it.
We said all that to let you know that checking out the legitimacy of the lender and how they treat borrowers is very important. You must find out whether they adhere to the best practises of the industry. Ensure that you read customer reviews about them both on their website and on 3rd party sites.
Factors that Affect Approval of Loan Application
After you have considered all necessary factors before applying for a credit facility, bear in mind that it is not automatic that you will get approved. When you apply for credit, there are certain things that he lender will also consider before they either approve your application or reject it.
Even in situations where your application is approved, they will also consider some things before they fix your interest rate and other terms and conditions. These factors include the following:-
Your Credit Score/History
One of the first things that a lender will look at is the credit history of the borrower. This encompasses a thorough assessment of every bit of your finances. They will look at your credit score which is a valuation of how well you handle your credits. Your score shows whether you repay your loans as at when due or you default.
Your credit history also shows your credit utilization especially how well you handle your credit card bills. Constantly defaulting on any kind of financial agreement will surely impact your credit score negatively. Visit this site for tips on how to improve and maintain a good credit score: https://www.wellsfargo.com/.
Your Income
Another factor they will consider is your income. This we know affects your ability to repay the debt accrued. In checking out your income, many lenders go further to evaluate your DTI which is your Debt to Income ratio. Your debts must be by far lower than your income; it (they) must be such that you can service without impacting negatively on your daily expenses or forcing you to change your lifestyle.
If your income is high or at least way higher than the amount you applied for, the lender sees you as a low risk borrower. This can encourage them to give you lower interest rates and better terms and condition.
The Amount you want to Borrow
The amount you apply for can also determine whether you will get approved or not. After a lender considers your income and your credit history, they will consider whether these factors justify the amount you want.
The amount will also determine the interest rate that you will get. Higher amounts attract lower interest while lower amounts attract higher interest.
Conclusion
Obtaining a consumer loan that can be considered as the best for you is hinged on many factors. We have discussed some of them in this article. You will do well to bear them in mind so that you can stand a better chance of benefiting from this financial system.
