To obtain a personal loan, it is important to meet a series of requirements. Not borrowing more money than necessary and not delaying payments are two important factors to take into account when applying for this financial product.
Buying a car, renovating your home or financing your studies are some of the main reasons to apply for a personal loan. However, to acquire this financial product, it is important to meet a series of requirements, such as having an employment contract or demonstrating sufficient financial solvency.
Additionally, taking into account other aspects, such as the type of commissions or interest that the bank charges, can help ensure that this financial product does not end up being more expensive than expected. Here are some tips to keep in mind before applying for a personal loan.
1. Don't ask for more money than you need
A few years ago, when you applied for a loan, it was common for the bank to offer you a higher amount than you requested. So, if the initial reason for applying was to change the kitchen in your house, you ended up also renovating the bathroom or buying new furniture.
Today, this trend has changed a lot, both on the part of banks and customers. The former no longer grant such light loans and the latter only ask for the money they need to cover a specific purpose.
When you apply for a loan, you will have to pay back the money that was lent to you, along with interest, commissions, etc., which will make the total amount owed considerably higher than what was lent to you. Therefore, when applying for a loan, it is best to adjust the amount you want to borrow as much as possible and you will avoid paying more interest on it.
2. Return as soon as possible
When the entity with which you take out a loan asks how long you want to repay it, try to make it as short as possible. You should take into account your income and make sure that you can afford to pay the interest on a regular basis.
Then, do the math and try to adjust the repayment term as much as possible, because the longer it takes to repay the loan, the less security the bank will have and the higher the interest will be. In fact, this is one of the factors that makes loans more expensive. On the other hand, if you pay off a larger amount in installments over a shorter period, you will pay off the loan sooner and it will be cheaper.
3. Don't be late with payments
When taking out a loan, it is very important that you pay the installments within the period agreed with the entity, without being a single day late. If you make the payment later than stipulated in the contract, the entity may penalize you by applying interest on arrears, which is normally much higher than normal interest.
If this situation repeats itself or you stop paying your monthly installment, your debt will not disappear, but will increase and your assets or bank charges may be seized. Therefore, before applying for a loan, make sure that you can afford it and, above all, that you make payments on time.
4. Justify the expense
When you apply for a loan, most entities will ask you what you intend to invest the money in, as this information provides them with a certain level of security. It is not the same to want a loan to pay off previous debts as it is to want a loan to buy a car.
For this reason, most entities offer specific loans to finance a specific purpose, for example, the purchase of a car, home renovations, studies, etc. These products have specific conditions and advantages. However, for the bank to grant you these benefits, you must prove with the corresponding documents that the purpose of the loan is the one you indicated.
5. Don’t resort to “quick money” without guarantees
When you apply for a loan, lenders usually take a few days to confirm that you are eligible to lend money. To do this, they will ask you to provide collateral that shows that you can pay it back.
If you are a salaried worker, they will most likely ask for your pay slip, which must show sufficient income, and your employment contract, which may require an indefinite term. If you are self-employed, you will also need to demonstrate financial solvency through invoices, bank statements or other types of documents.
However, there are some entities that offer “fast money” without the need to provide payment guarantees. You should be careful with this type of loan, as they may charge higher interest or commissions than other entities.
6. See the TAE
When taking out a loan, you should not only look at the interest that will be charged, but also other conditions that may make your loan more expensive. Thus, when you apply for credit or a loan, many entities may require you to take out certain products, such as insurance or cards, or charge certain fees that may make the cost of the product much more expensive than it would seem if you only took into account the interest. Therefore, when taking out a loan, look at the APR (Annual Equivalent Rate), which is the one that includes the total cost of the loan, including fees, interest, expenses and commissions.
7. Compare different personal loans
Without a doubt, the best option to obtain the most suitable credit for each person is to compare the different products available on the market and those offered by different entities. One option is to look for personal loan comparators. In them, you can select the amount of money you need and fill in the questionnaire data and in a few seconds you will be able to find out which loans are available to you. This way, you can choose the most suitable loan for you and avoid paying more money than necessary.