Tips when applying for a loan for the first time

In today’s challenging economy, loans or credit accounts are being offered left and right as solutions to augment one’s personal financial needs. An approved loan can be a saving grace in certain situations but it could be a burden for others who are not familiar with the obligations that are usually incorporated when taking a loan.

If you are planning to apply for a loan for the first time, you might have mixed emotions. Questions will usually pop up in your head such as- is this a good decision or will this be a solution? In order to address your worries about applying for a loan for the first time, you should make important considerations that would make this major financial move favorable for you.

Know your numbers.

Now that you are keen on borrowing for the first time, you must be realistic on your ability to pay off this first loan. Take note of all your income sources from usual monthly paycheck to other expected money that will be coming in if you have sidelines or part-time gigs. Have a clear understanding of your debt-to-income ratio and measure the percentage of your monthly salary that will be utilized for loan payments.

Define the type of loan that you need.

Loans come in various forms from credit cards, mortgages to personal loans. Secured loans require you to have your assets as collaterals while unsecured loans will not require any collateral. Typically, a secured loan will provide higher loanable amount with lower interest rate but bear in mind that this type of loan will place a risk on your assets if you fail to comply with the terms.

Get as much information from possible lenders.

Start scouting for lender prospects. Go to your local banks and inquire about their loan or credit products. Ask as much questions as you can such as terms, procedures, fees and available payment schemes. You can also get in touch with other lending companies through phone calls or emails. Once you are satisfied with the information you have it’s time to review them and plan for the best loan option suitable to your finances.

Getting a loan is easy but paying it off might become difficult if the borrower would not be as responsible enough as possible. Before you apply for a loan, one major consideration is that you borrow money from a legit lender. There are a lot of scammers and loan sharks out there so beware if someone promises you of a loan that’s too good to be true.

Once you were able to secure the loan and get the money, make sure to spend it to where it is intended so you will not regret anything in the future. Also, be a responsible borrower. Pay your dues on time or make advance payments so you finish your loan quickly. If you continue to be a “good payer,” there is a chance that your credit score will increase and you can borrow again soon at bigger amount but with smaller interest rate. That would be very advantageous especially if you plan to borrow money for business or any investment that generates income.

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