All the groundwork is done and you’re finally ready to get going, so you apply for a loan from the first SMS advert, or spam mail that (let’s face it), used to be spam, but is now exactly what you need.
But do yourself a favour and avoid making this mistake which so many hasty individuals make.
Take the time to consider every aspect of the purpose of the loan. Once you have considered all these factors, you’ll have a far clearer idea of the type of loan that is best suited for you and your business. There are a number of things to consider, as mentioned before. One of them being:
How much do I need?
Remember, if you go into a meeting with a lender and you spitball figures or throw around numbers that don’t add up, (literally), the lender won’t take this loan seriously enough to approve you the amount you might truly need. If you need a loan, 9 times out of 10 it’s due to a specific amount needed, work with that number. If you qualify for more and it’s offered, then it’s safe to consider whether additional money might be required during the process of assisting your business.
Be mindful not to take out a loan that is too big where your repayments aren’t affordable or don’t fit with the cash flow of the business. Getting into hot water with debt repayments is counterproductive to the loan you’ve just applied for.
The next thing that people often are too impulsive to get involved in researching is:
How much does it cost?
There are a few costs to consider and you should probably inquire about these all up front. Your interest rate is the primary concern and then your annual percentage rate is another.
There could potentially be fees involved in taking out a loan with a certain lender that you hadn’t yet considered. These costs are required to be disclosed, but why delay your time in expecting them to be thorough, they are trying to sell you something after all! Disclosing all the costs isn’t going to be their opening discussion. So, with all that said, ensure from your seat that you ask all the right questions relating to the costs of the loan. The last thing you need when you’ve taken on a debt is to be blindsided by more of it.
An extremely important factor to consider as well as:
What is the repayment term?
There will, of course, be optional terms, and it would be wise once again to assess the repayments you can afford for the business. The shorter the term the better! But the revenue in will determines how long the term might need to be. Bearing in mind the longer the term, the more interest you are paying, even though in most cases, if you take out a longer term, you will receive a better interest rate!
One of the more important questions which all the others will pertain to is:
Why do I need this loan?
Ask yourself if this loan is to help you out of financial trouble, or whether it’s to resolve a problem that is causing financial strain on the business. If it’s the former, then taking out a loan will assist. If it’s for the latter, you need to ask yourself whether this problem isn’t going to continue and that the problem should be resolved before taking out a loan.
Understand whether you need instant money to sort out something once off that you can’t afford in one go, or whether you constantly need access to cash for a recurring term.
There are various loans available that are specifically suited to match the needs of a loan. A personal loan is always an option, but make sure that you understand why you are applying for the loan and guaranteed there will be a tailor-made loan option out there for you!
Below is a brief overview of just a few of these loan options
Need to redo the kitchen in your house? Keen to vacation overseas? A personal loan will allow you to explore all these desires with a lump sum of money upfront upon qualifying for the loan. It’s a quick fix that you are comfortable to pay off over a long period of time, but be prepared for a higher interest rate than loans that are specific.
These days there are a lot more students that are taking out student loans. Parents don’t always have the money to fulfil the dreams of their children, and that should never stand in the way. That is why student loans are a great option for students, and as with all loans, there is the interest rate to consider, however on student loans the repayment of interest is only upon graduating from your studies!
Getting from A to B is the daily grind - before the daily grind - for all of us. Having a vehicle to do this in, if you’re not dependant on public transport is a liability we can’t seem to avoid owning. Cars are expensive and with rising petrol prices and inflation costs, the majority of us aren’t in a financial position to purchase one case. A car loan is available in the form of a lease agreement. This is a far more attractive option, especially with lower repayments than if you had taken out a personal loan. There are also benefits if you own a business, where leasing may provide tax benefits if the vehicle is used for business purposes. What a lease agreement translates to for us to understand it, is that should you default on your payments or stop paying them all together for whatever financial difficulty you may have landed in, the car will be repossessed by the lender. Also, once a lease agreement is over, you can simply return the car and walk away or sign up a new lease agreement as it is still owned by the lender until such time you put it in your name. The maximum length of a lease agreement is 7 years and the minimum of 12 months, so you really can feel at ease with this sort of specific loan when looking at buying a car.
As you’ve read, there is a multitude of things to consider when in search of the best loan option for you. Do your research, acquire the information you need to get started and as soon as you possess the confidence to go ahead, go get your loan!