You may be anxious about the new year – cost increases and additional expenses, such as school fees, might leave you wondering how you will go about improving your personal finances in 2023. The first step towards financial wellness is to educate yourself about the different options available to you. There are times where you may need to evaluate your finances and the only choice you have to improve your financial situation is to take up a loan – there is absolutely nothing wrong with taking up a loan because sometimes you need a bit of financial help.
However, it is important to understand what you are in for before signing on the dotted line. “Loans are there to help and not drown you in debt, however when you commit to taking up a loan you need to make sure you can manage your debt responsibly”, cautions Hesta Vermeulen, Digital Channels Manager at iMasFinance. You can make informed financial decisions by gaining knowledge of the factors that affect your loan application. Here are some of the main factors to keep in mind when taking up a loan:
1.Credit check: A credit check is a report that has all your financial information such as the types of credit accounts you had in the past, your payment history and credit limits. The Credit Bureau analyses your financial behaviour to determine how you are managing your current credit. “Your credit score is important to know because it has an impact on whether or not you loan will be approved as well as on the interest rate you will be required to pay,” says Vermeulen.
2. Interest rate: “Make sure you can afford the loan by understanding the conditions of the loan, which includes the interest rate, instalment amount and loan term” says Vermeulen. The interest rate is not only determined by a person’s affordability but also by the prime lending rate which is the basic rate of interest that financial institutions charge when lending money to their clients. It is important to note that if the prime lending rate changes your interest rate will also change.
3.Installments: After gathering information on your credit score and the current interest rate you qualify for, you need to draw up a budget to see if you will be able to afford the monthly instalments for your loan. “It is important to determine if you can afford the instalment amount in order to avoid missing your monthly payments as this will have an impact on your credit score and will make it difficult to manage your debt responsibly” advises Vermeulen. Negotiate your instalments before taking up a loan or alternatively, shop around for a better instalment. “iMasFinance gives you the option to deduct your instalment from your salary, which will help you to never miss a payment” says Vermeulen.
Take action if you struggle to pay your debt and speak to your financial services provider to get advice on what you can do to get your debt back on track. “As a caring financial wellness partner iMasFinance does more than just offer loans and vehicle finance, we care about your financial goals by offering financial wellness training to equip our clients with living financially well and making informed decisions about managing their debt” concludes Vermeulen.
