THINGS TO CONSIDER/KNOW BEFORE TAKING A LOAN
In the previous article TAKING A LOAN IS NOT A BAD IDEA, I state that many people are scared to take loans to support whatever they need money for, partly because of what they have heard about the troubles that come with taking a loan, the dragging by creditors, and partly because of the interest rates. Anybody can take a loan as long as they meet the requirements.
However, you don’t just jump at the idea of taking a loan when things are not going smoothly for you or your business. Listed below are some factors you should first take into consideration before requesting for a loan, either from a commercial bank, a microfinance bank or a microfinance institution.
1. Understand the concept of the loan:
One of the reasons borrowers always find it difficult to pay back their loans is because they have little understanding about what they were getting into. They so badly needed the money that they didn’t read carefully the terms and conditions of the loan, the interest rates and other necessary information. Before you take a loan, it is expected of you to know a great deal about the bank or company granting you the loan, understand how the interest rates work, and so on.
2. Have something that is generating income for you:
Before taking a loan, be sure you are making money somewhere, either through another channel of business or civil service. Don’t take money when you’re going bankrupt or when your business is close to empty. If you’re taking a loan, be at least a salary earner or a business owner. Jobless people should not take loans.
3. Ask for a loan when you’re making sales:
When you want to take a loan, be sure you’re making sales, be sure money is coming in everyday. As the money is coming in through sales, be saving up to pay back your loan… this is where the attitude of saving comes in. Like I explain in the previous article, you can pay up your loan before the due date.
Don’t take loan when the economy is bad or when sales are slow.
4. Be genuine with your reason for taking a loan:
If you’re taking a loan for business, use it for that business. Don’t collect a loan to restock and use the money to throw a birthday party. Be honest with yourself.
I’ll like to quickly chip this in. Don’t take a loan because someone has promised to give you a certain amount of money. If someone promised to give you N100,000, taking a loan hoping to pay back when you get the money someone promised you is a very bad idea, humans will always be humans, you can be disappointed.
5. Know your worth:
Before taking a loan to support your business, be sure your shop is full to an extent, be sure you have at least goods worth 150% of the loan you’re taking. Don’t take a loan to start up a business, that’s a very bad idea.