14 5 Things to Think Before Getting a Loan


Things to Consider when Getting a LoanThere is no doubt that personal loans comes with pitfalls. But if used correctly, they can be used to kick start your dream start-up business or save you from financial trouble. 

However, there are many lenders who may try to deceive you with fees and high interest rates. Anytime you wish to borrow money, you need to be careful when considering if you're making the right decision. 

Securing a loan requires your commitment to pay your dues within the agreed time frame. You need to consider how this responsibility will affect your finances moving forward.

You should consider the following before you borrow money:
  
1. You have a plan and you're committed to it
Never borrow money when you haven't decided yet what to do with it. Sounds simple, right?
Yet many people fail to do this when they read or hear something like:

VERY LOW INTEREST AND FAST LOAN APPLICATION APPROVAL!!

Some people never thought of securing a loan, yet because of what seems to be a great offer, they instantly realize of considering applying for a loan and think of where could that money bring or give them: a vacation to Boracay, a new iPhone, or pay all debts. Whew!

But this is not always the case, of course. Sometimes, a loan can actually help ease one's financial burden, or help establish a dream. Is it good debt or bad debt?

 
Let's say you wanted to get a loan that has an annual interest of 4% in order to pay an existing loan that is costing you 1% a month or 12% a year. Then the purpose becomes justifiable.

However, we tend to borrow more than what we actually need, so we end up having extra money
in our hands. And what better way to do with that money but to spend it, right? So before you fill-up that loan application form, be sure that you already know how much you really need to borrow and stay committed to that plan, because it's not fun paying a loan for a couple of months to years when you don't even know where the proceeds went. So plan and stick to it!

What you need to do: Make a Budget Plan.

2. You have stable source of funds for repayment
Late payments are costly and that's a fact. Penalty on late payments are costly and impacts your overall credit history. What's even worse is that this penalties actually adds up to your loan's principal amount so it compounds over time! Make compounding interest your ally, not an enemy. So before you apply for a loan, ask yourself first, 
How do I plan to pay my loan?

What you need to have: A steady source of income.

3. You have a no-nonsense purpose
Many people wanted to borrow money to start a business. On a hindsight, it's quite a valid reason. It's a good debt, what could be wrong?

This is where
immediate and long-term planning should be considered.

Let's say you wanted  to secure a loan to:

  • Open sari-sari store business. Many people, especially in the province, fall victims to a vicious cycle of borrowing money from high-interest lenders called 5-6 to open a small store or carinderia. Immediately, they have a business! The problem? They are now working badly for the repayment of the loan. Hence, most stores close because the daily bigger-than-profit payment of their loans are big enough to hurt the store's operations.


What you need to read: How to Succeed in Your Sari-sari Store


  • Buy stocks or Mutual Funds. First, it is really not advisable to open a high-yield-high-risk type of investments out from borrowed money.  This is to avoid loss in case of unwanted expenses such as emergency. Because this might force you to withdraw your investments. This is critical because what if by the time you needed your money, the market is down? If you do that, you will loss a substantial amount and might upset your stomach! 


What you need to read: The Complete Idiot's Guide to the Stock Market /
   Understanding Mutual Funds


  • Join a Multilevel Marketing (MLM) company. While there are some success stories out there about network marketers who made it big by joining an MLM company out of borrowing or getting a loan, it's still a general rule of thumb not to. Yes, it's a legit business, but there are a lot of things that you need to consider before jumping into their ship. That's why most people end up with debt and were left with nothing but inspiring stories.


What you need to read: Is Network Marketing Business a Scam? /
   5 Questions to Ask in MLM Companies


  • Buy something you don't need. New phone. New Camera. New Car. Wow! Just filling up the form already makes you salivate of the hundreds of likes, shares and comments you're about to receive when you finally make that coveted Social Media status, #MyNewBaby.


As Will Smith best puts it:
Too many people spend money they haven't earned, to buy things they don't want need, to impress people they don't like know.

 What you need to do: Grow up.

4. Your take home pay should be at least 45%
One of the principal basis for the approval of a loan application is the capacity of the borrower to pay his or her dues.That's why it would be normal for lending companies or banks to do some basic math regarding your financial status by requiring you to submit a copy of your latest pay slip.


To make it graphic, let's say your monthly salary (Gross) is 30,000 Pesos. By subtracting all the mandatory deductions such as tax, your net pay is 25,000 Pesos. From this, 45% of 25,000 pesos should be taken home by you. Meaning, this portion (11,250) of your net pay should be left untouched to fund your daily living expenses such as food and bills. Hence, the allowable monthly due for your loan should not exceed 13,750.00 (55% of your net pay).


 







This process protects the borrower from facing financial dilemma from borrowing more than what his or her financial capacity can afford. It's because the daily expenses need to be considered as well. Of course, this percentage varies from one company to another.

What you need to do: Compute.

5. Find out the best available loan program for your need by visiting LoanSolutions.PH
LoanSolutions.PH is a loan solutions provider that aims to help Filipino borrowers get the financial aid they need at the most convenient terms (and possibly the lowest interest rate) by partnering with top banks and lending companies. 



LoanSolutions.PH has its own on-line screening process where it can match a borrower to a lender that is amenable to his or her capacity to pay. And yes, the screening process is FREE! This will save you quite a lot of time lining up or the expense of going from one lending company to another.

Where you need to go: Visit www.loansolutions.ph today!


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