A lot of people might think taking a loan to actualise personal goals is a bad idea. They believe using debt to actualize ones financial dreams doesnt sound right to them.
See, it's not that deep. You can take loans to meet some of your personal goals. It only depends on how you manage it.
However, before you take any loan, you need to ask certain questions to be sure you're ready for its effects on your finances.
If you are thinking of taking a loan anytime soon, you need to ask yourself these five questions.
1. What do I need this loan for?
Don't take a personal loan before your friends are taking it. You need to be clear on the purpose of the loan before taking it.
Do you want to finance an emergency purchase or fund a much-needed home improvement? Whatever your reasons are, you need to clearly identify the purpose first before taking a loan.
2. How much do I need to borrow?
After identifying your reasons for taking a loan, next is to determine how much you'll need to finance the project.
Taking more credit than you need just because it is a loan isn't a good idea. If the project you are taking a loan for will cost you only N100,000 don't take more than that. Just get the needed amount and make sure it is not more than that.
3. How much can I afford?
While you identify your loan purpose and how much you'll need to borrow, you also need to think about how much you can afford to repay.
Remember that the more the loan you take, the higher your monthly instalment and the interest on your loan.
The bigger your personal loan, the higher your monthly instalment payments will be. You’ll also pay more in interest and origination fees.
4. How fast can I pay It off?
When you take a loan, you should work towards paying it off as quickly as possible. That's what makes you creditworthy. This is why you should consider how much can afford before taking a personal loan. This is why it is also important to carefully consider all options before you borrow money.
5. What happens if I can't pay it off?
Here is the most important question you should ask yourself before taking a personal loan.
In case you lose your job, how do you intend to pay off your debt because any late payments or skipped payments will affect your credit score.
Do you have a side hustle you can rely on in case of job loss? How soon can you find another job if you lose the current one? You really need to put all these into considerations before applying for a personal loan.