A Guide to Personal Loan for First-Timers
It’s almost inescapable that we will, at some point, be needing financial help. Even when you have saved money, there will always come a time when your finances won’t meet your needs due to emergency purposes. Be it a sudden need to have a roof repair for the rainy days, a new set of expensive books for your schooling or you had to buy a new appliance for your kitchen—despite the effort of having saved enough money, sudden financial needs will come to you at a time when you least expect it.
But you need not fret about this. There are many options out there that you can consider if you’re in a situation where you need to borrow money. You can come to your parents and ask for additional allowance. You can sell unused stuff online, maybe to your friends and relatives, and generate some amount of money from it. You can even get a side gig to complement your current stream of income just to have more money at hand.
If you are someone who is not keen on doing all that, however, there is one other option. Which is to go to a bank or credit institution and file for a personal loan application. It might seem overwhelming, especially if you’re a first-timer, but the truth is it’s easy so long as you’ve gone through the effort of following the relevant requirements and instructions.
Whether you are a newbie in borrowing money or not, here is a list that can guide you to achieving a smooth and worry-free application.
Make sure that you are qualified
When applying for a personal loan (or any other type of loan, for that matter) there are certain requirements you need to meet in order to qualify. Aside from being 18 years old and above, another important factor that loan providers consider is your income stream. Of course, they should know where you’ll be getting the money to pay them, after all. Do you have a stable source of income? Do you have enough resources to pay your debt? It is critical that you meet these requirements to be able to qualify and get to the next step.
Having a credit card is both an advantage and a curse
One of the requirements is you should have a credit card. Why? Because institutions check your credit status to see whether you are capable of paying, and they determine this by checking your credit history. Your credit history is often passed around by credit institutions to reveal your credit behavior and your reliability in paying your debts. If you are a good payer, then you need not worry about this. All you have to do is pay your existing loans on time, and be careful to minimize paying beyond the deadlines. If you are the type who often gets his credit card maxed out, however, then you may want to rethink applying for a loan in the meantime. You might want to pay your existing loans first before applying for another loan. Institutions are scrupulous when it comes to checking their applicant’s credit status. This is simply because financial institutions want to avoid the headaches and expenses that will necessarily accrue as a result of clients not following through with their payments.
Know the interest rates
Don’t ever apply for a loan without first taking note of the relevant interest rates. You need to compare interest rates from different banks and see which between them offer the best rates. You also need to understand the payment scheme you’re applying for–is it something you can comply with? Go for the schemes that work best for you. Remember that the longer the payment scheme, the higher the interest rate you’ll end up paying. On the other hand, the shorter the time frame, the lower the interest rates will be.
Another tip is to simply refrain from overborrowing. Remember that you should only borrow money that you have the ability to pay. To save more money while paying your loans, you can add more income streams. Consider having access to freelance work on the side—be it conducting online classes on a topic you love, selling your old clothes, or advertising your services. Be creative in thinking of new ideas to pay for your loans so that you won’t have to worry when and where to get your money.