4 Things You Will Need To Consider Before Taking a Personal or Business Loan In Nigeria.
posted on Apr 5, 2024 | 892 likes
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The decision to take a personal or business loan should never be taken lightly.
After all, it means giving up some of your freedom and security. However, if you know the factors involved in taking a loan, it can help you to make informed financial decisions.
In Nigeria, business and personal loans are becoming more common as more people are taking advantage of these opportunities to help their lives, businesses, or personal goals.
It is important for one to always remember that there is a lot of responsibility in making sure that it is the right decision for you.
Before applying for a loan make sure you consider the effect it will have on your expenses, what the repayment amount will be, and what you intend to do with the money. Regardless of which type of loan you choose, there are four key factors you should consider before taking a loan.
A good loan should have the following distinguishing characteristics:
Time to maturity. Time to maturity describes the length of the loan contract. Loans are classified according to their maturity into short-term debt, intermediate-term debt, and long-term debt.
Revolving credit and perpetual debt have no fixed date for retirement. A perpetual loan requires only regular interest payments. The borrower, who usually issued such debt through a registered offering, determines the timing of the debt retirement.
Repayment Schedule. Payments may be required at the end of the contract or set intervals, usually on a monthly or semi-annual basis. Over time, the principal amount of the loan is amortized or repaid little by little until it is completely retired.
As the principal balance diminishes, the interest on the remaining balance also declines. Interest-only loans do not pay down the principal. The borrower pays interest on the principal loan amount and is expected to retire the principal at the end of the contract through a balloon payment or refinancing.
Interest. Interest is the cost of borrowing money. The interest rate charged by lending institutions must be sufficient to cover operating costs, administrative costs, and an acceptable rate of return. Interest rates may be fixed for the term of the loan, or adjusted to reflect changing market conditions.
Security. Assets pledged as security against loan loss are known as collateral. Credit backed by collateral is secured. In many cases, the asset purchased by the loan often serves as the only collateral.
Whether you are on the lookout for a personal or business loan, it's necessary to consider the potential advantages and risks involved before taking one. Speak to a financial advisor who is experienced to advise you on the type of loan that is right for you.