Financial security is when you know you do not have to worry about the basic needs of life. It also involves having the courage to comfortably withstand any emergency life throws your way.
The outbreak of COVID-19 was unexpected. Apart from the health implications it caused, the global economy has suffered greatly.
The outbreak of the virus resulted in job losses and business closure. The situation is so worse that even stable sources of income are no longer guaranteed.
As a result, many people have had to reduce their expenses, and the need to seek loans to enable sustainability or survival is on the rise.
While many may consider taking loans to meet their current needs, here are five (5) tips on what to consider before taking that step.
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1. The lender
With different financial institutions willing to offer loans, it is crucial to find the right lender. At a critical time, such as this, securing a loan can come at significant risk and cost. It is, therefore, essential to get it from a source that will provide acceptable terms. It could be from a friend, family, community fund or a microfinance bank. Ensure you secure the loan from a lender willing to give you the best possible conditions and a well laid out repayment plan.
2. Do Your Homework
Research is key. Do your homework and be well informed about it. Ensure you have a realistic means of repayment. Look at the viability of the loan and ensure that you have a realistic chance of paying back on its due date.
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3. Work Out Your Payment Plan
Many focus on planning on how to spend a loan and determining how much they need to secure. While this is essential, it is equally important to plan on how you will repay a loan. It would be best if you decide whether you will be paying on a weekly or monthly basis. These factors will guide you in choosing a loan with favourable payment terms to avoid unplanned costs.
4. Credit History
Having a good sense of your credit history is also very important. Know your cash flow and be sure of your income and expenses. Know the precision in terms of what you can get and when you can get it, so as to draw up an excellent and reasonable payback strategy.
5. Terms and Conditions
Ensure you read the fine print and understand the various terms and conditions of a loan before signing any legally binding documents, including a personal loan agreement. In some instances, you may find it difficult to understand certain things regarding the loan you are about to secure. Try as much as possible to clarify all doubts before taking the final decision.
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Financial strain may not be the sole purpose of taking a loan. However, whatever the reason may be, it is crucial to consider these five tips before securing one.