WHAT TO EXAMINE BEFORE TAKING A PERSONAL LOAN

By Kelvin Mkwawa, Seasoned Banker.

In an ideal world, everyone would have enough money for his/her needs but that is not the case so some of us will need to borrow money to cater for our needs. Once you decide to borrow money, it is crucial to think long and hard before you take that route. There are so many places where you can borrow money from: friends, families, micro and macro lenders and banks. One of the options for borrowing money is through a personal loan from the bank. There are two types of personal loans – secured personal loans and unsecured personal loans. The most common type of personal loan is an unsecured loan which is borrowed in a lump sum without collateral.

It is important to seek professional advice if you're unsure about whether a personal loan is the best option for your financial needs and right for the goal you're trying to achieve. Used wisely, a personal loan can help individuals achieve a number of financial goals. People decide to get loans for many reasons so it’s very important to know which questions to ask yourself before seeking personal loans. Today I will share the key questions that you should ask yourself before getting a personal loan from a bank:

• Will It Help Me Achieve My Financial Goal(s)?– This is the most important question you need to ask yourself before you borrow a single cent from a bank. To be able to ask yourself that question, take a look at your financial picture and develop your financial goals. For example, your goal can be buying a house, funding an education, looking for capital to invest in your business, or financing an emergency family situation. Regardless of the goals, it is important to know whether the personal loan will help you achieve those goals and equally important to have a clear purpose of the personal loan you want to get. This is a very key step towards making meaningful decisions such as how much you need and for how long.

• Can I Afford It? - The first rule of smart borrowing is this: do not borrow money that you cannot repay back comfortably. One of the easiest traps to fall into is taking out a larger loan amount than you need. Therefore, before getting a loan, you must review your monthly budget and cash flow to figure out if you usually have money left to cover extra obligations after your necessity needs. In case there is no money left for additional obligations, look for areas where you can cut your costs to have more room in your monthly budget before thinking about taking a personal loan. Furthermore, always make sure you read the fine prints of conditions and terms that go with your bank’s loan to understand the bank’s loan fees and charges before you sign up to take any loan. Your primary concern should be keeping the cost of obtaining a loan as low as possible, hence shop for banks that offer competitive interest rates and fees to ensure your monthly repayment cost is affordable.

• Is It Convenient? – When shopping for your personal loan, it is important that you asses your needs as a customer to make sure a bank that you will take a loan from, offers you other services that are convenient for you. You should always look for a bank partner that really sees the world from your point of view and understands your journey. Therefore, it is very important to ask yourself which bank understands your needs, has convenient products, and a customer-centric culture before you decide to take a personal loan.

Let me wind up by stating that at the end of the day, think twice before you borrow from a bank. Do your homework and ask yourself these key questions that will help steer you into making the right financial decision. After that, move forward with confidence, get a sensible loan, and commit to paying it off.

Written by Kelvin Mkwawa, MBA
Seasoned Banker
Email address: Kelvin.e.mkwawa@gmail.com