An easy-to-understand guide on how to take out a loan and what to do while doing so.
Do I even need a loan?
This is the first question to answer before going to the bank. It is quite possible that the money for the cherished purchase is not enough because of the peculiarities of your approach to financial management. If you reconsider it, it’s possible that you won’t have to borrow money.
If you have big expenses ahead of you, like repairs or buying a car, you will have to save for a long time. A loan is a right solution. Once a month, you’ll pay back your debt to the bank in small installments without worrying that prices are going up and you have to save more and more.
How do I know how much money is worth borrowing from the bank?
If you can’t do without a loan, calculate all the risks beforehand. Subtract from your salary monthly expenses for utilities and communications, food costs, travel to and from work. What remains, divide it in half. The result is an approximate amount that you can pay to the bank without being broke.
Calculate the amount of the loan and the time in which you plan to return it is so that a month to spend no more than 30% of your income. Ideally, this should be 20%. Payback the money longer and with an overpayment, but you will be sure that in principle you will be able to pay the loan back.
A good idea is to have a financial safety net of at least three of your salaries beforehand. If unexpected expenses arise, it will help you make your next loan payment on time.
What else do I need to know before taking out a loan?
Find out if the bank has additional bonuses for borrowers and prepare the necessary documents, instances you will need a paystub.
The contractual rate reduction is especially important now. As a result, bank lending rates are decreasing.
The credit is a convenient and profitable financial instrument if you study conditions and estimate probable risks beforehand. Decide whether you really need it, and soberly assess your capabilities about the total amount and monthly payments. With a prudent approach, the loan will not turn into a constant headache and source of anxiety.
Should I insure my loan?
Let’s imagine that events unfold according to a very bad scenario. You borrowed money from the bank, but suddenly you are left without a livelihood. Sickness, job loss, whatever – the loan still needs to be repaid. The bank can help you do just that.
Some banks have a borrower financial protection program. It applies to consumer loans and allows you to repay your debt to the bank in full with an insurance payment. You can enroll in the financial protection program when you fill out an application for a consumer loan.
For example, if you lose your job, the bank will pay you a monthly fee while you are unemployed. At the end of the month, this money will come into your account.
The decision not to insure the loan is an extremely questionable idea. We can’t say for sure what will happen even in a month, let alone over a longer period. If you don’t need the bank’s support in the end, fine, but if anything happens, you have somewhere to go for help.