There are situations in life where asking for a loan is not only a great help but also a way to achieve certain goals. Buying a house, financing a master’s degree, investing in material to grow a business… these are just a few examples. “However, before even asking for it, it is important to ask yourself: can I afford this loan? Do I have the financial capacity to meet the installments or am I too tight?”, emphasize the personal finance experts of the financial buyer HelpMyCash.com
According to specialists, there are five key factors that must be taken into account before requesting a loan. And it is that if the banks take into account the client’s debt ratio when granting a loan, the logical thing would be that whoever asks for it also knows if their economic situation is adequate.
“Being over-indebted is a risk that should not be taken. If an unforeseen event arises, it will not be possible to continue meeting the obligations and that entails the collection of late fees, embargoes, inclusion in a list of defaulters…”, they emphasize from HelpMyCash.com
According to finance experts, the ideal is not to dedicate more than 35% to the payment of total debts. “We refer to the mortgage, personal loans, cards and any other debt that we have in force,” they add. And if you don’t have a mortgage, then your debt ratio should be 20%.
1. Loan amount
The first question the borrower should ask is: how much money do you need? To answer you must be able to clearly describe the purpose of the loan. Lending to satisfy a whim or whim is not a good reason.
2. Can you afford the monthly payment?
This is, without a doubt, the most important question to ask. If the loan has a monthly payment higher than what can be managed or allowed, penalties and late fees could quickly accumulate.
Before taking out a loan it is important to know the debt-to-income rule. This is nothing more than the amount of money owed in relation to what is earned or entered. Ideally, the debt does not exceed 35% of the income.
3. Type of loan
After deciding on the amount of loan needed, the next step is to assess what type of loan would make the most sense for your situation. While a personal loan can be used for anything from home repairs to consolidating high-interest credit card debt, a student loan may be best suited for paying for a master’s degree—plus, the interest rates are often lower. .
From the comparator, the three most attractive personal loans on the market stand out: “ING’s orange loan, the fast online loan without documents from BBVA and the Cofidis personal loan are the ones that offer the lowest interest rates and with fewer commissions”. In this sense, Cofidis stands out for its competitive interest rate from 4.95% NIR (5.06% APR), it also has no opening commission and can be requested 100% online and without paperwork. Nor does it require the direct debit of the payroll nor is it necessary to have an account in the entity. The minimum amount is 6,000 euros and the maximum is 60,000 euros to be repaid over a maximum of 10 years.
4. Type of interest and ASD
A loan has two interest rates. On the one hand, there is the interest that is calculated as a percentage of the outstanding balance of the loan and is incorporated into the amount of the monthly payment, this is known as TIN (nominal interest rate). On the other hand, there is the equivalent annual rate (APR), a percentage that is calculated according to the guidelines of the Bank of Spain and that takes into account the additional costs that the bank could charge, for example, for commissions or insurance.
“In other words, the TIN is the interest rate that you are going to pay each month –that is why it is the most important–, while the APR will only matter to you if it is very different –high– compared to the TIN. If the percentage is very different, it is a clear wake-up call. Read carefully the small print that breaks down the extra costs included in the loan. We always recommend negotiating with the entity, perhaps you can avoid acquiring extra insurance or lower commissions”, they explain from HelpMyCash.com
5. Advance payment
Some loans include what is known as a prepayment fee (or penalty), which means that if you decide to pay off the loan early, the bank will charge you for it.
