Applying for a digital loan can be overwhelming as there are so many options available on the market! If you are considering borrowing, here are some important points to think about before taking out a loan:
Why do you need a loan?
First of all, what do you need a loan for? Determine what you need it for, how much you need it and when you can return it. Only take out a loan if you absolutely need it (emergencies, meeting a business goal, etc.) and if you have a plan to repay it.
TIP: Applying for a loan to pay off another loan is not recommended. That can lead you into a debt spiral.
What is the fee or interest?
Loans are not free. There is a fee to access the loan. Make sure you know what their commissions are. In addition to fees or interest, some loans have other fees that could be associated with the way you pay or maintenance fees. Most loans will also charge a late payment fee if you don’t pay your loan on time. Read all their terms and conditions before taking a loan!
How long do you have to pay the loan?
The term of your loan is not forever. You must repay your loan within a specific period of time. Make sure that before applying for a loan you know exactly how long you have to pay it off, this will allow you to plan your finances.
How will you pay your loan?
Before applying for a loan, make a plan to repay it. You can adjust your living expenses to plan ahead and know exactly what you need to do to raise those funds. This will ensure that you are not caught with additional commissions.
What is the payment process?
Each loan has a different payment process. Some may require you to go to a bank, others may allow you to transfer mobile money. Some loans, like Tala, allow you to make partial payments so that you can pay off your loans little by little before their due date.
Make sure you know exactly what is required to pay off your loan before your loan is due to see if you have to give yourself time to prepare to pay it off.
What is the penalty if I don’t pay on time?
If you don’t repay your loan on time, most loan services will require you to pay a late fee or extension fee, which makes your loan more expensive. If you don’t repay your loan, lenders are also legally required to report any delinquent loans to a credit bureau. This can affect your ability to obtain a loan in the future. Make sure you always pay your loans on time.