When you need financial aid, there are always different ways to request it. You can begin borrowing money from the people you know, or even from your bank.
There are many ways and steps to get money fast, and rightfully so, just as long as you make sure you can pay it back.
Have you decided how and where you’ll be borrowing money?
If you haven’t, here are some words of advice.
The following are the things you need to consider before borrowing money.
How Much are You Borrowing?
What do you wish to fund with borrowed money? Is it a project? An expensive purchase? Or to provide for your everyday needs until such time?
When you borrow money, it has to be at the amount you need to cover the needed expenses immediately.
Compile, make a list, or estimate how much money you want to borrow.
Depending on where you plan on borrowing, you might be offered the exact amount of money you need or an estimate of what you can have.
Stick to the amount you need and can reasonably pay back.
Where Will you be Borrowing the Money From?
Another thing you need to consider is your lender. Who or where will you borrow?
Consider which will bring you the most convenience and the best offers possible, whether it’s from a bank, a credit union, or even from a cash advance loan lender.
For this reason, you can choose between your bank, credit unions (if you are a member of one), and lending companies, whether physical or online. You can even borrow from someone you know if the amount you need isn’t that big.
If you opt to borrow money from someone you know, such as a loved one, make sure you can trust them and let them in on how you will be spending the money and when you will pay them back.
For your bank and credit union, you can always approach them and inquire about available offers they have, whether through email or appointment.
As for lending companies, confirm if they are a legitimate business unless you already have transacted with them.
If you want to try with a lending company you haven’t heard of before, make sure it has a physical address that you can visit, a safe website, and proof of registration either in their office or on the site.
If you know it’s safe, look at how you can borrow money. You can either go to their office for a more personalized transaction or when you need extra information. As well, you can do it online to have faster and convenient deals.
For How Long Do You Need the Money You’re Borrowing?
Time is an essential factor as to why and how you’re borrowing money. You may have long-term commitments or projects you need to fund, or you need to get by for a week or a month or two until you get a better financial source. Loans cater to both the long run or the short term.
How long will it take for you to use the money?
If you need it for a long time, you need to get a loan that will have your back for however you need, and if you want something fast and temporary, you can opt for short-term loans, though those tend to be more expensive at times.
How Much is the Interest Rate?
Another thing you might want to look out for is the loan interest. The interest is the price charged by lenders to take out a loan in general.
In other words, not only should you pay back the money you borrowed, but you also need to pay the interest rate given to you. The amount varies on the type of loan, the amount borrowed, and the loan duration.
Essentially, you would want to get a deal with a reasonable interest. If you want a better look at your options, you can look at each loan’s APR, or the annual percentage rate, because this also includes additional fees you need to pay other than just the interest rate.
Consequently, you can also check the loan’s way of calculating the interest, which is simple and compound interest.
What is simple interest?
Simple interest is multiplying the principal amount by the annual interest rate, and compound interest is multiplying the principal to the sum of one plus the annual interest rate raised to the power of how long the loan will take and then subtracting the principal.
Does your Credit Score and DTI Ratio Pass the Application Requirement?
A very crucial factor to think of is how eligible you are to borrow money. If you were personally borrowing from someone, you know there won’t be a problem.
However, borrowing money from financial institutions requires a way to prove your creditworthiness. This is how lenders decide whether or not to give you a loan.
There are two ways you can check on your creditworthiness: your debt-to-income ratio and credit score.
A debt-to-income ratio is a calculation of your debt payments divided by your monthly income.
The result is the amount of money you have that is meant to pay your debts. The lower the ratio is, the better. Above all, a good ratio would be 36 percent or less.
A credit score is a number used to determine your creditworthiness.
This is assessed by financial institutions taking a look at your credit history, primarily debts you have and if you’ve paid them on time.
The credit score ranges from 300 to 900, with 660 and above considered good to excellent.
To Sum it Up
If you want to borrow money, plan ahead. You need to think of the amount of money you want to borrow, how long you need it for, where you want to borrow from, the interest rates and your eligibility to do so.
Therefore as a result, you must get the best deals to make the most out of borrowing money.
Discussion: Have you ever needed to borrow money and what process did you go through? Comment below.