It is always important to have a planned strategy for borrowing your loans or you may end in a debt trap.
- Calculate your need: Money needs may vary depending on which phase of the business cycle your entity is in. You may need a working capital loan to expand, pay your expenses, or maintain liquidity. Prioritize your needs and then decide on your loan amount.
- Enhance your credit score: The first thing that a lender checks in a loan application are the credit score. If the credit score is low, the lender may straightforward reject the application. Hence higher the score, the better the chance of approval, and the lender might even charge a lower interest rate.
- Consider extra costs: Apart from interest rates, several other charges may be levied on a loan, and all of them together can substantially increase your borrowing cost. Compute all the fees and penalties like processing fees, late payment fees, prepayment fees, and other statutory charges before entering a loan contract.
- Pick the right lender – When selecting a lender, choose the one with excellent customer service, a good reputation, and knowledgeable staff. Taking recommendations from friends and family can be a good way to choose a lender. Different lenders charge different interest rates, prepayment fees, processing charges, etc.; make sure to compare them before finalizing the lender.