Nowadays, taking a loan is as easy as logging in to your favorite social media site. No more CI or Customer Intelligence and personal background assessments are needed. In just a few minutes, your loan application could be approved depending on the loan usage and the amount to be loaned. In fact, Homecredit, a financing company here in the Philippines approves gadget, appliance, and cash loan by showing two valid IDs with a salary slip only. But regardless of the type of loan that you are applying for, no matter how big or small it is, it is still important to consider the following points even before thinking of having a loan.
Is it a need or a want?
Most of the time, some people take loans for wants. Newly-released gadgets and fancy cars are few examples of wants. Most of them are not income-generating possessions that could depreciate in value in few years. However, a gadget and a car might become one of the needs especially if these mediums are essential to run a business.
Calculate the rate of interest
This factor is pretty much obvious before getting a loan. It is important to know how much the lender will take away from your pocket. Clearly, the lower rate of interest, the better. And in order to lessen the interest considering the same amount of loan, try to minimize the period of paying for the loan.
Affordability to pay for the maintenance
If you’re considering a loan for a car or a real estate, you have to take into consideration the upcoming costs in order to upkeep the maintenance of your properties. Can you handle the fuel expenses? How about the property taxes? Just be sure not to be one of those people who loaned considerable amounts for buying kinds of stuff only to realize how maintenance is costly and unaffordable in the long run.
Your own earning potential
While it is very easy to over-count the eggs that haven’t been hatched, it is also easy to underestimate the future expenditures, not to mention the unforeseen events that may happen. If you think your earnings is just enough to pay for the amount you are about to loan, then think again. Having enough is never enough since it may also mean that you’ll be living from paycheck to paycheck until your monthly loan installment is finished.
Read the documents
Always read everything that has been written on the agreement loan before signing it. Do not rely solely on that sales representative for he must have skipped several important details that may be used against you in the future.
No matter how many times I look at it, a loan is just another term as debt. And as what I’ve said in my recent Credit Story, a debt will always mean “Enjoy now, Suffer later” for me. It can only be “Enjoy now, Enjoy even more later” if the rate of return of the loan’s purpose (i.e. business, investments) is greater than the rate of interest. But if you badly wanted it that much, just make sure to be financially-ready for the added fiscal obligations that you are about to face, or else, you will end up selling other possessions just to pay for your loan.
