In this article, we’ve listed 6 financial precautions you should take before you even sign the contract.
Taking care of our finances is something we should practice since childhood. After all, it is through knowledge that we are able to resolve our doubts and avoid scams. For those who decide to choose a loan, these precautions must be redoubled.
Therefore, in this article, we have separated six essential tips for those who want to apply for loans from financial institutions. They range from the need for the loan to the payment time. Want to know a little more about the subject? Just keep reading until the end.
1. Assess your credit need
Why do you need the money? Thinking about it is one of the first precautions needed when taking out loans. Depending on your financial reality, taking credit to travel or having more money for shopping can make your situation even more complicated.
In other cases, such as renegotiating debts, starting a business or raising money for a family situation, taking out a loan may be really necessary.
Ideally, avoid taking out the loan if you can save money for a few months and put off the purchase, whatever. If credit is needed, adjust your personal budget to absorb this debt as best you can.
2. Make a plan to pay the installments
Before getting into debt, be prepared to get out of it. A loan cannot become a commitment that you cannot honor, and putting together a financial plan is essential to avoid this type of problem.
The amount reserved to pay the installments cannot exceed 15% of your monthly income. Otherwise, you may lack money for basic bills, such as rent, water, electricity and supermarkets, which will cause you to incur new debts.
Also be cautious about accepting loan proposals in easy installments, as there are usually many. Remember: the shorter this debt remains with you, the better your finances. Contingencies can happen, and it’s best for you to be on budget when they come.
Another point of attention are the extra costs of the loan, such as interest, taxes and charges in case of late payment. Before closing the contract, always consider the Total Effective Cost, which takes into account all these variables.
3. Know the credit modalities available on the market
Do not apply for credit before knowing the main modalities available on the market.
This is one of the main precautions needed when making loans, as the differences between types of credit can be decisive for getting payment terms in line with your budget.
4. Research the terms and interest rates
One of the main precautions needed when taking out loans is to do a good research of the terms and interest rates offered by different institutions.
You can talk to your bank manager to find out what he has to offer, but don’t be stuck with it. Check other banks, lenders, and online credit sites to compare options.
Because they have leaner operations, some companies that only operate over the internet can get better conditions, such as cheaper interest rates and a simpler hiring process.
5. Beware of scams
Many shell companies take advantage of people’s need to apply the fake loan scam, tricking consumers and taking their money. To be on the safe side, it is essential to know the reputation of the institution from which you are taking money.
6. Read the contract before signing
Unfortunately, many people ignore one of the main precautions necessary when making loans: reading the contract before signing.
This is essential so that the person does not have surprises along the way, being aware of all maintenance fees, readjustments, cancellation possibilities and other important points.
Read also: How do I access my paypal credit card login account?