There are many individuals who take up so many loans, and then suffer paying them back. So it is necessary that you think of a few main factors that you need to think of before and after taking up a loan.
Before Taking Up a Loan
Why? First, you have to think why you need the loan, because the banks provide so many different loans for various different purposes and then opt for the appropriate loan type.
Interest Rates and Repayment Period
You have to consider the interest rates, because you will have to pay back the amount of the [loan+ (interest x credit period)]. For example: Let’s imagine you want a personal loan. Get the details from the financial institutes that provide personal loans, and then compare them especially the interest rates and credit period and chose the best personal loan suitable for you.
Most individuals don’t give much thought about their affordability when taking a loan. As the old saying goes “Bite only how much you can chew”, you should only take up how much you can pay back comfortably. How to calculate? Take your monthly income, subtract it from your budgeted expenses for the month such as: food; travel; rent; etc., then you’ll get a remaining amount of your income. This remaining income should be comfortably able to pay the monthly payment of your loan.
After Taking Up a Loan
What you are going to do with the loan cash?
This is circulating back to the initial question, the purpose. You should only use the money for the intended purpose and not get distracted by other situations. For example: Let’s say you took up a student loan for college fee, and you see a sale at your clothing retail shop. You shouldn’t spend it on other things because first priority is the purpose.
However, let’s say you got the scholarship you applied for and have to only pay half of what was previously required. What are you going to do with the surplus? Are you going to spend it, save it, invest it or pay back the loan? The wisest decisions would be to invest on a good investment or pay back the loan so your burden of paying back the loan is lightened.