First evaluate:
- How much do I need?
- Should I use credit at all?
- Is my cash flow regular enough to permit monthly or weekly repayments?
- How much extra cash do I have each month to cover the loan?
- How long can I afford to cover this extra cost?
It is important to examine your financial situation. Compare your income to your regular expenses, and make sure you can repay the debt without causing yourself hardship. Also, try to anticipate additional expenses that may come up over the next few months or years and include these in your calculations.
10 questions you can ask your bank:
- What types of credit are available: fixed payment, interest only, etc?
- What kind of collateral, if any, is required to secure the loan?
- What is the interest rate?
- Does the rate fluctuate?
- How can I increase or decrease, later on, the amount I have to pay each month?
- Can I determine the amortization of the loan to suit my cashflow?
- How long will it take to get my application approved?
- If my credit rating is unsatisfactory, what can I do to improve it?
- Is there insurance available on the product?
- Will the information I give you be kept confidential?
Always remember….. the faster you can pay the loan back, the less overall interest you pay. The following features will help reduce the overall interest costs:
- Shorter amortizations,
- Lower interest rates,
- Higher monthly payment amounts,
- Accelerated weekly or biweekly payments in lieu of monthly payments
- Lump sum prepayments
When the unexpected happens
It can happen to anyone: an accident, illness or a job loss. If it happens to you and you are worried about how to manage your payments, call the financial institution that granted the loan and tell them about it. While you may find this difficult, the loan officer or branch manager can help you work out a plan that will get you through the difficult period. You may also wish to consider optional life or disability insurance, which are available on most forms of credit.
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