Interest rates, flexible payment terms and loan duration are three basic things to take a look at before accepting any loan offer. But you also need to consider your need for the loan and your ability to repay same. Here are three questions to answer before accepting any loan offer.
Do you have a reliable source of income?
Having a guaranteed and regular source of income is a good indicator that you can pay off your personal finance or business loan within the stipulated time.
It’s the reason behind some financial institutions preferring to give loans to people who save regularly with them (a minimum of three months). It shows that you have a reliable source of income.
Do you need the loan?
Basic Economics teaches that our needs are not the same as our wants. A need is something you can’t live without; a want is something you desire and won’t die if you don’t get it. Do you need the loan? Don’t accept the loan offer if you don’t need the money.
Do you want to use the loan to pay off another loan?
The quickest path to getting stuck in a vicious loan circle is to take one loan to service another. There are people who have built a habit out of accepting loan offer after loan offer, and you shouldn’t be one of them.
Unless the new loan comes with a lower interest rate compared to the first, don’t take it. If the interest rate is very competitive to enable you pay off your first loan and then the second without needing to go in for a third loan, go for it.
Don’t accept a loan offer just because it’s available and everybody is taking it.
Do you need it? Can you pay it off within the stipulated time? Choose wisely.