How to Get a Loan and Not Drown in Debt

A loan is a convenient financial instrument if you know how to use it correctly. Nevertheless, borrowed money requires responsibility, discipline and the right approach to choosing a loan. We explain how to properly arrange a loan and avoid bad credit history and headaches. Whatever the situation due to which you decide to use credit money, you need to remember: if you decide to borrow money, you must be 100% sure that you can repay the loan. The choice of a specific type of loan depends on what you are going to spend the loan money on and what amount you need for this. The purpose depends on which loan conditions are right for you. The period in which you repay the loan depends on the amount you need and how much you can pay per month. All these parameters determine the choice.
Whatever the situation due to which you decide to use credit money, you need to remember: if you decide to borrow money, you must be 100% sure that you can repay the loan. The choice of a specific type of loan depends on what you are going to spend the loan money on and what amount you need for this. The purpose depends on which loan conditions are right for you. The period in which you repay the loan depends on the amount you need and how much you can pay per month. All these parameters determine the choice.

The principles of loans are payment, repayment and urgency. This means that you always need to pay for the use of borrowed money (as a rule, a certain percentage), and the loan must not only be repaid, but also done exactly on time. At the same time, there are a great many loan options, depending on the terms, conditions and requirements for the borrower.

Purpose loan or no-purpose loan

Large-scale goals require more money, which means that it will take longer to repay the loan. In addition, it depends on whether you disclose the purpose of the loan to the bank or not, what conditions the bank will offer you.



Long-term loans are repaid for more than five years. As a rule, it is taken with a clearly formulated purpose - to buy land, a car or housing. For this, there are special types of loans, such as mortgage and car loans. They have their own characteristics related to insurance, collateral, requirements for borrowers. But at the same time, such loans are more profitable than consumer loans.

An no-purpose loan is issued for any purpose, that is, you do not have to report your spending to the lender. But the interest rate on such a loan will be much higher than that of a purpose loan.

For planned large expenses, such as medical treatment, renovation or your dream honeymoon, a consumer loan is suitable, which is usually issued for a medium term.

For small purchases, a credit card is suitable, which can be issued very quickly, in almost any bank via the Internet. If you have an acute shortage of not only money, but also time, then microcredit is a good option.

Also, do not forget about express loans, which are often offered for a specific purchase directly in the store - for example, a washing machine, TV, or a new smartphone in the household appliances department. Such loans have their advantages: they are issued on the spot, very quickly, with a minimum of documents, but the interest on them is higher than on a regular consumer loan.

So which loan should you choose?

You have to choose from ready-made loan offers. Formulate how long it will take you to repay the loan, whether you will tell the bank about what you are taking the money for, and whether you are ready to issue a collateral. These are your basic requirements for a loan.

Before taking out a loan, be sure to check whether the commercial bank you have chosen has a special permit from the National Bank (license or certificate).

Explore different options when you find the best offer for yourself, do not forget to find out the full cost of the loan with all interest, insurance premiums and payments. And also carefully read the agreements, there are many important things, and it is better to entrust the study of the loan agreement to your qualified lawyer.

Remember that your debt load should not exceed 30% of your monthly income, otherwise you are at great risk.

Don't overestimate your financial capabilities

Before taking out a loan, take a break and think how much you need this money, whether you can do without it and how you will return the amount received. Consider not only your salary or pension, but also possible difficult circumstances. A layoff, illness, or crisis can disrupt the most elaborate plan.

Do not take a loan from the first bank that you see. The proximity of a bank branch to your home, or a bright banner is not the best criterion for choosing a bank. The market is full of loan offers, so check with several organizations. Compare terms and costs to choose the loan that suits you best. Do not forget to study the history and reputation of the bank. If you are a student or retired, please inform the bank employee about this: there may be special offers for you.

Do not forget about your rights

The internet is full of creepy stories of brutal collectors and overwhelming fines for late loan payments. You need to take out a loan only from organizations that have a license from the National Bank. Do not borrow money from black credit organizations - and then nothing bad will happen to you, banks and collectors act according to the law. If the creditor turns out to be a scammer who threatens you and violates your rights, contact the police.

If circumstances are such that you cannot make the next loan payment, have lost your job or are sick, do not hide, do not change your phone number, but honestly talk with the bank representatives. This does not mean that you will be forgiven the loan debt - you will have to return the money in any case. But it is likely that the bank will provide a deferral or recalculate the amount of contributions. For example, it will reduce the amount of monthly payments by increasing the loan term.

Do not sign a loan agreement if you do not understand its terms

Take the time to read the entire text of the loan agreement, especially the small print, this will save you time and money in the future. Carefully study all the conditions for issuing and repaying a loan. Pay attention to commissions, late fees, additional terms such as insurance. If something is not clear, ask the bank employees, demand to explain, consult with your qualified lawyer. Sign the loan agreement only when you understand all the conditions exactly.

Do not delay repayment of the loan

Follow the loan repayment schedule and do not postpone the next payment until the last moment. It makes sense to set aside 5-7 business days before the date of the loan payment, so that the money can be credited to the bank account. It will not be superfluous to put a reminder in your smartphone or hang a bright sticker in a prominent place. If there is an opportunity to repay the loan in advance, use it. This will save you from possible problems in the future - if difficult circumstances suddenly arise and you cannot pay the next installment on the loan.

Don't forget to close the loan

If you made the last installment on a loan and seem to have closed the loan, do not rush to breathe a sigh of relief. Call the bank's hotline, confirm the closure of the loan again or get a certificate. Check your credit history, it can be obtained free of charge from the credit bureau.

Avoid common mistakes when getting a loan, take your time and study the details. So that the loan becomes a useful financial instrument for you, and not a source of problems.

Observing these simple rules, you can successfully use credit products without the risk of falling into a debt abyss.

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