The principles that you should follow when borrowing the money
Loans may conceal a variety of risks and dangers and they can prepare you very uncomfortable situations. To reduce the risk to a minimum extent it is necessary to follow some basic rules:
1. Consider if the loan is really the best solution to your financial situation. Calculate your incomes and expenses and try to note whether your money is thrown out the window. If you realize so, you can use these funds to cover your financial needs.
2. Choose within more loans and more type of loans, do not take the first loan you see or you are addressed with.
3. Remember that the APR (annual percentage of rate) is more important than the interest rate. If you are comparing more loans, always have a look at the APR.
4. Are you able to repay the loan before the appointed time? Not always it is without problem. Find out about the early repayment as much as possible before signing the loan agreement.
5. If you have to guarantee the loan with your property, think twice what to pledge. Consider carefully how to proceed when you lose the property that you guarantee with.
6. Bank loans are cheaper and safer. If you can get a bank loan, apply for a loan at a bank (The basic conditions for a bank loan are 1) having a stable income 2) not having a record in the Credit Bureau). The non-bank company loans are more accessible, but they have higher APR and interest rate and in general they are more risky.
7. Special-purpose loans are more favorable – if you need money for a flat, a house or a car, choose a special-purpose loans.
8. A loan in which it is necessary to pay some fees in advance is suspicious. Solid loans do not require any fees in advance.
9. Loans from well-known and verified companies are probably less risky than loans from an unknown company or private lender.
10. Read the loan agreement thoroughly and carefully before you sign it. Pay special attention to paragraphs written in small font – they usually hide the biggest “pitfalls”.
11. Think about whether you will be able to pay the loan timely and properly. Compare your current monthly incomes and expenses and calculate if there is a space for loan installment.
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If we decide to take a loan we should follow some basic rules to avoid getting into unexpectable troubles. The main principles are summarized on this webpage.
Loans - the general terms