4 Tips to Help You When You Apply for a Short-Term Loan

Posted by Nabin Shaw on December 10th, 2018

Most people will need to take out a loan of sorts at some stage in their life. It might be a significant loan like a home mortgage, student loan, or a small loan like a short-term or personal laen (loan).

At this juncture, it must be noted that although it is fairly easy to be awarded a loan by a financial house or authorised lender, you have to qualify for the loan. Also, the interest rate attached to the loan is almost always based on your credit-worthiness. Therefore, here are four tips to ensure that your loan application is successful:

Know your credit score

It is vital to keep track of your credit score (or credit worthiness) even if you are not interested in applying for one form or credit like a credit card, home mortgage, or bank overdraft

Why?

In short, you never know when you might need to apply for a line of credit, and it is not comfortable to have the credit application declined because your credit score is too low. Unfortunately, your credit score might be wrong erroneously. You might have unpaid debts listed against your name in error. Therefore, it is a good idea to check your credit score once a year to ensure that it is up to date and accurate.

Copies of documentation

It’s a good idea to keep certified copies of your proof of residence, proof of income, and identification handy so that when you apply for the loan you can submit copies of this documentation with the loan application.

These documents form part of the Know Your Customer (KYC) framework which is required by all financial houses and institutions to prove that you are a legitimate citizen who lives and works in the country of your application. This set of documents aims to prevent terrorist organisations, front companies, and money launderers from doing business.

Make sure you read the small print

When signing the loan documentation, make sure that you read the fine print and that you are aware of the repayment terms and the interest attached to the loan. Succinctly stated, once the loan agreement has been signed, and the money has been paid into your bank account, you cannot contact the lender and query the terms of the line of credit that has already been granted.

Stick to the repayment terms

It is absolutely essential to stick to the loan’s repayment terms. They will be set out in the loan agreement that you need to sign. If you deviate from these terms in any way, the following four things will happen:

• You will default on the loan terms and conditions,
• Your credit worthiness will be impacted negatively,
• You will be held liable for the total outstanding amount that will have to be paid immediately,
• And you will more than likely be handed over to debt collectors to recover outstanding amount, including debt collection fees.

Therefore, as mentioned above, it is vital to ensure that you stick to the repayment terms.