Things to consider before accepting a loan offer
Before taking a loan, several things need to be put into consideration. They need to be considered because taking a loan could be detrimental to your image if you have problems with repayment. Taking a loan that is best suitable for you would enhance your ability to pay and give you a good credit score.
Below are some of the things you should look out for before accepting a loan offer:
Interest rate and method of calculation:
The interest rate at which you are going to be given the loan should be seriously considered before accepting a loan offer. The higher the rate, the more expensive and unfavorable the loan is to you. In a case like that, it is best to reject the offer or negotiate a better interest rate if you have a good credit score. Also, the method which the loan is calculated is another major consideration. The flat and reducing balance method are the methods of loan calculation. The reducing balance method favors the obligor as against the loan company. A loan may be 5% and calculated on flat rate method but a 5.5% loan on the reducing balance method would be a better offer. Reason being that the interest reduces with the reducing balance method of interest calculation.
Terms and conditions:
Every loan comes with terms and conditions. Reading the fine prints of loan agreements is important. There are so many loan companies so be sure to choose the one with favorable terms and conditions. Transparency in terms and conditions is required and in a case where there is no transparency, this is a serious red flag.
When something sounds too good to be true, it most likely is. Stay clear of ambiguous promises that are not specifically telling you the requirements for the loan. Several people have cases where they take a loan and then during repayment, other payments that were not agreed upon begin to pop up. Specifically, ask the credit analyst what other charges you would be required to pay asides the interest. There is a standard life insurance fee on all loans. This is a charge that should be communicated to you prior to disbursement of the loan. Other companies have different levies such as Administrative fee, Legal fees, and several others. Sometimes, you will not be told beforehand and the loan agreement given to you to sign would speak against you because you were probably too busy to read in fine print.
Creditville Limited has no hidden charges. All customers are required to pay the standard 2% of the amount disbursed as life insurance fee as a precautionary measure for cases with loss of life.
Documents required to sign:
For every loan, there are certain documents that you are required to sign. For online loans, you would be shown an agreement which you can either accept of reject. Rejection means, rejection of the loan. Do not sign just any document without reading its fine print or asking your credit the specific content of the document. The standard documents are the loan agreement and the life insurance form but some companies may have some others. In which case, you would need to go through them thoroughly to ensure that you are not getting into a commitment you cannot get out of.
Repayment tenure varies with companies and the particular kind of loan you are interested in taking. Creditville’s payday loans and business loans run for a period of twelve (12) months while the car lease/ car hire purchase loan runs for a period of twenty-four (24) months. Your income would determine if you would be able to pay off the loan at the end of a certain duration. Also, some loans are required to be paid monthly, some others quarterly and some others monthly. You would need to check if the frequency of payment is one that you can meet up with before you end up putting yourself in a situation you would find extremely difficult to get out of or in other words, carry “gbese” on your head.
Flexibility and ease of payment of the loan:
Loan structures are very important. The flexibility of the loan would determine what you would be able to get away with. Some loans are made in such a way that payments are flexible. You are allowed to pay more than your monthly repayment amount in a case where there is an unusual flow of cash. You are also allowed to liquidate before the end of your tenure. While some loan structures allow for this flexibility, some others do not.
Loans generally come with penalties for default. A default in payment often comes with a certain percent increase, interest is accumulated and amount to for repayment increases. Some loans also come with penalties for early repayment which hinders you from liquidating at any time you want to until the loan tenure is over.
Reputation and dependability of the lender:
Reputation is a lot in the loan industry. Lenders are known for different things. Do not underestimate what your lender is known for. Before you do business with any lender, you should do your research. Make sure you’ve heard of the lender before and that it has positive reviews from other borrowers. While some rumors are just rumors, it is often said that there is an atom of truth in every rumor. Check for testimonials. What others have to say about the loan company says a lot about how your relationship with the company would turn out. You should be looking for convenience and integrity. Trustworthiness is everything in this business. If the loan company has a reputation for not being trustworthy and harassing their clients physically then it probably should not be a place for you. While loan companies may harass you to get back their money, there is a limitation to which this should be done. There should be no doubt in your mind that your lender is trustworthy.
The total payback amount:
Total payback amount is the value that represents the principal amount of the loan plus all costs (including interest, origination fees, credit reporting fee, application costs, legal fees, etc.).It is important to inquire for additional charges to be paid asides the interest rate.
Here’s an example of total payback: You receive a loan offer of ₦1,000 at 10 percent (%) annual interest over three years, with ₦150 in financing fees. With those terms, your total payback amount is ₦1,335.86 for ₦1,000 borrowed, if you pay it over the three-year term through monthly payments.
Knowing the total payback amount allows you to determine whether the cost of a loan really fits your business or personal budget. It is important to evaluate the total payback (repayment) amount including all costs in absolute figure rather than just the quoted rate, as this is what ultimately affects your budget.
Every repayment plan comes with a repayment schedule. Examine your repayment schedule to know if it suits you. Some loans are flexible enough to be adjusted while some are not.
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