Borrowing money to finance your education is a good investment, but if you want to take out a loan to fund your lavish student lifestyle before you’ve started earning, then, its best to stay away from loans. Here are five things to consider when taking out a loan:
1. Interest Rates
Do you ever wonder what the actual difference between certain interest rates are? Well, you should, and this is going to require some homework on your part. The difference between two interest rates could mean thousands of Rands for you. Money you could be putting to better use.
2. Loan Terms
If you are given the choice of a shorter repayment period against a longer term, the longer repayment option may be very attractive and have a lower monthly payment but at the end of the day you are paying more money than you have to. If you can manage a couple of hundred Rands on top of the payment of the longer term then definitely go for a shorter loan term. You won’t regret it.
3. Early Settlements
Always read the fine print! Before you sign, make sure there aren’t penalties for paying off the loan earlier than you have determined. You might be shocked at what you find. It’s worth getting a friend studying law or your parents to take a look over the agreement for anything you may not be looking for. It’s always easier to learn from someone else’s mistakes – no need to make them again yourself.
4. Type of loan
Before you take out your loan, consider your options. There are pros and cons to different loan options (e.g. Personal or Student loan?) and you should shop around before you make your decision. Student loans are often great entries into your field of work as some institutions offer a ‘work-back’ option whereby you are obligated to work at a particular company for a period of time after completing your studies in order to make good on that loan. In essence, you’re guaranteed a job straight out of varsity. The downside however is if you value flexibility over work security. These are decisions only you can make, but know all your options before diving in.
5. Your Credit Score
The only reason anyone would grant you a loan is because you have proved to be a reliable client. And how do they know this? The Credit Bureau has a record of how you have settled your accounts with various retailers and financial institutions. All lending institutions make use of your credit score to determine if you are eligible to obtain a loan.