Loan application could sometimes be a blessing or curse, depending on how it is used if finally approved by financial institutions all over the world, Nigeria in particular.
What comes to anybody’s mind, whenever, the term loan is mentioned is that is the money given to another party in exchange for repayment of the loan principal amount plus interest.
This may not be a general definition of loan or what it is all about.
Techeconomy.ng, in this article will be highlighting the top ten things anybody who wants to apply for a loan should put into a serious consideration.
Meanwhile, the Central Bank of Nigeria (CBN) had recently released guidelines aimed at reducing bad loans in the banking sector and to monitor chronic loan defaulters.
Below are the ten things to consider before applying for Loan in any bank in Nigeria.
1. Type of loan
There are different types of bank loans. So, it’s important to choose a loan that suits a situation and main reason for it, before anybody considers the loan application, such a person should think very well about what he wants to use the loan for.
2. Current financial status
Looking at monthly and yearly budgets may help anybody understand just how much he can afford to make in loan payments, this will help to decide on a loan amount.
3. Credit history
The importance of this cannot be over emphasized and the finest rates are available to those with the good credit history.
As a result of capping of interest rates, most banks are anxious about lending for risk of default. Beforehand you should check your acknowledgment score in order to know the likely prospects of getting the loan certified.
4. Interest rate
Even if this is one of the most important details governing decisions of anybody that wants to apply for a loan, he should not be blinded by faulty advertising.
A lower interest rate is a good thing; but it also means that the repayments will carry on over a longer period of time. If the interest rate is reasonable compared to the loan term, then it is a good thing to go ahead and sign those papers.
5. Loan term
This is another important point in accounting as a lot of loans have fixed terms, usually 15, 20, 25 or at most 30 years. Some lenders will enable you to change the term, if they think you can pay the whole debt off within half the time.
But this may not be an option that lenders will willingly offer. Ask your bank if they offer opportunities to pay them back earlier or later, and how the change will affect your interest rate as well as monthly payments.
6. How you plan to pay it off
It is quite sad that many borrowers fall victim of this. It is just like they hear about a loan and rush it without considering the payoff plan. This is one of the key points but it’s important to plan out how you intend to repay the debt.
Will you be paying weekly, fortnightly or monthly? Do you plan to pay it off sooner than the term? These key factors will help you choose the right loan to ensure that you avoid any unnecessary costs.
7. Penalty charges
To every negative action, penalty is inevitable. Refusal to repay the loan is a reality we all face. In case you are not able to pay your dues on time, there is normally a very weighty penalty indicted on your credit account.
8. Down payment amount
The amount of money that you put down depends on the financial institution granting the loan. Although not all loans require down payments (usually home equity loans use the house as collateral so no down payment is necessary), you may benefit by putting some money down on your mortgage or auto loan.
9. Hidden charges
Make sure you read the fine print before finalizing a deal. There might be charges you are not aware of, especially for home equity mortgages. Find out about things like early repayment fees, arrangement charges and the like.
10. Don’t bite more than you can chew
The principal rule of clever borrowing is don’t take a loan that you can easily repay.