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Financial Expert, Kalu Aja, has enumerated what anybody who wishes to get a loan should consider before getting one. According to Aja, there are five things that must be considered prior to getting a loan.  See his list below-

What is the Interest Rate?

According to the Financial Expert, the first question to ask oneself prior to getting a loan is the question about the interest rate is.  An interest rate is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Interest is essentially a rental or leasing charge to the borrower for the use of an asset. In the case of a large asset, the lease rate may serve as the interest rate. When the borrower is considered to be low risk by the lender, the borrower will usually be charged a lower interest rate. If the borrower is considered high risk, the interest rate that they are charged will be higher.

Why it is good to always ask about the interest rate, is to determine if the loan is cheap and as well taking into consideration the tenor of the loan and the possibilities of paying back before it expires.

What is the Annual Percentage Rate?

The second question to ask yourself is about the annual percentage rate. This is the annual rate charged for borrowing or earned through an investment. The annual percentage rate is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction but does not take compounding into account.

What Are the Late Payment Covenants?

In legal and financial terms, a covenant is a promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out. Covenants in finance often relate to terms in a financial contracting, such as a loan document or bond issue stating the limits at which the borrower can further lend.

Can I pay early?

Asking yourself this question will help you really decide whether or not you should borrow the loan in the first place. Are you borrowing an amount of money that you can easily pay back or would you find it difficult offsetting the loan as at when you are expected to? What plans do you have in place to be able to pay back the loan on time? Are you ready to face the consequences that may arise in the case of a default?

Are there any charges?

There are always charges associated with any loan given by a bank, except of course it is given to you by an Islamic financial institution. Bearing this in mind, therefore, it is expected of you to find out what these charges are and be sure you can handle them.

What are the mitigation procedures?

Would you get the opportunity to have your loans modified with new terms just in case the situation requires it? This is a very important provisor to look out for when agreeing to a loan term.

Why it Matters: Most times people neglect to ask themselves these important questions when getting a loan. Instead, they are carried away by their need to get the loan, without considering what happens after the loan is gotten.


As a financial advocate, Nairametrics wants our users to be financially literate. Hopefully, you will find these points useful.


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