Things to Consider for Getting Your First Loan
Getting a first loan is a major decision and the biggest responsibility on you to pay them off on time. Therefore, you should not take it lightly. It is the big financial step which can be exciting and challenging at the same time. Once you make the decision of applying for your very first loan, just make sure you are going with the right lender and with the most flexible terms. Your savings may not be fruitful for all your needs and expenses. In order to cover some important and unavoidable expenditure, you may think of applying for a loan. With variety of loans options in the market from abundance of lenders, it can be tough to find the right one. So, to make the decision of getting your first loan, you need to be smart enough to get hold on the feasible loan option with better rates and terms.
Following are the things to consider for getting for first loan-
For loan application, you need to have proof of your current employment with having fixed monthly income. It is the most important aspect of having a loan. You need to submit a salary letter from your employer and if you are a self-employed borrower, then you need to show your tax returns for past two years at least along with possibly invoices and receipts.
Your credit score
Lenders will determine your credit worthiness before approving you a loan. A good credit score or credit history shows lenders that you can pay your financial obligations on time. The better your credit rating is, the better the chances of getting a loan with most favorable terms. You can still qualify for most loans with bad or no credit history, but the interest charges on them could be little higher as compared to the ones with good credit history.
Before getting your first loan, it is important to check out the interest charges of the loan you are applying for. Interest rates of loans may vary from loan to loan and lender to lender. There are small to long term loan options available with different interest rates and terms. Do research well and compare the interest charges carefully before applying for a loan. Small loans carry higher interest rates and long term loans are of two forms that are secured ones and unsecured ones. Secured loans carry lower interest rates but they are backed with collateral pledging. Whereas, unsecured form of loans do not involve any collateral pledging and thus they come with comparatively higher rate of interest. You should go for a loan if you can able to afford it. If not, then you should avoid opting for them in the first place. Failed or missed loan repayment will result in huge penalties and increased interest charges. On the other hands, non-repayment of loan will also put bad effect on your credit rating.
Assets and liabilities
Ahead of considering you worthy for a loan, lenders may also look for your net worth or will check your assets minus your liabilities if any. Assets are the things that you own like your property or other valuable things and liabilities are the financial obligations you have, such as any sort of debts. The first loan you even thinking to apply for will also become a liability, which you may be using to fulfill some important financial requirements. Calculating your net worth will also give you knowledge to keep your finances in track.
How much do you need
Knowing beforehand why you need money and how much do you actually need is the most essential factor that you need to understand before taking up a loan. Borrowing money is the most critical stage of life and it can help you or hurt you-depending on how you manage it.
How much you can afford
Now that you have determined why you need money and how much you need, now you need to know how much you can realistically afford. Taking up money you need is easy but it is not necessary you can able to afford that much with your restricted income. It is difficult to judge the actual amount you can afford but by using loan calculators you can easily estimate the total cost of the loan (the primary loan amount, interest rates, APR and fee charges). This will help you to take the right decision.
How to find a right loan option and a right lender
Today’s loan market is flooded with abundance of lenders offering variety of loan options at competitive rates. Therefore, it is important to find the best one that matches your requirements perfectly. For that you need to search, compare and find loans carefully. Online gives you the opportunity to collect loan quotes from different lenders for free and then by comparing them carefully, you will be able to lay your hands on the right loan deal by the right lender and at a right price. Also, online loan applications are much easier, faster, reliable and hassle-free way. It would take only few minutes to get started online.