Top 10 Considerations To Re-pay your Loan Very Well.

Loans from banks, friends, and organizations are one of the ways of raising startup capital for your side hustle. Most loans are to be paid back with interest within a given specific time. Since loans are bound by time and a specific amount of money, it’s important to pay them back in the right specified amounts within the specified periods of time. In this article, we shall discuss Considerations To Re-pay your Loan Very Well by paying the right amounts on time.

Why you should re-pay your loan well?

Before we discuss the Considerations To Re-pay your Loan Very Well, let’s look at why you should actually re-pay your loan well.

• To increase your borrowing limit.

In case you expect to ask for a loan in the future, proper repayment is very important. Your approval to receive a loan shall depend on how well you repaid your previous loan. This also comes into play if you wish to ask for more money in the future.

• To safeguard your security.

Failure to pay your loan well puts your security at risk. Your security may be captured for some time and this may affect its capacity to bring money if it does.  

• Free your business of debts.

Paying your loans keeps your business free from debts

• Avoid late payment fines.

Late payment comes at a cost that is stated in the loan terms and conditions. Paying your loan well shall keep you away from all these.

Below are the Considerations To Re-pay your Loan Very Well.

Borrow the right amount.

This is one of the most important Considerations To Re-pay your Loan Very Well. Most institutions try to enforce this. They value your security, business, and savings history to give you the right amount. Though, the ball is in your hands. You the borrower have a big say. You may have all it takes as security and savings history but when the money you want isn’t the right amount for a specific task. If it’s less, you’ll not make a proper investment. And if it’s a lot, you may fail to repay. This is due to high interest yet you actually didn’t use the money.

The repayment time duration and installments.

Though most institutions have the repayment time fixed already, you still have to critically look at the repayment time period and installments You’ll be paying in the given time duration. These should be ideal and fit your revenue. You should efficiently repay your loan but also remain with money for day-to-day expenditure. If all loans don’t fit your needs, ask for a custom loan designed specifically based on your needs. Though this should be to a less extent, these organizations have loans to fit almost every personality. Try to be flexible.

Read also: Why most businesses fail.

How about the interest rate?

This is the additional amount of money due per period which is usually a percentage of the borrowed sum. This you pay to the organization as a reward for helping you with their money. Before you get a loan, look at this critically. This is one of the main reasons why you’ll fail to repay your loan. A small interest rate is ideal.

Borrow from reputable organizations.

Not all microfinance institutions are reputable. Some just want to cheat their customers in their massive wealth-building journey. Sadly, some of these companies have those bad goals that they don’t reveal to their clients. If you are reading this, you are saved that I’ve told you. The way they schedule their loans, interest rates, and terms and conditions are geared towards failing you. So that they take your hard-earned property. Avoid those to be safe. You can check out some of the reputable organizations I recommend in Uganda.

A test on the business before investing is ideal.

This is another consideration to re-pay your loan well. Investment is risky. Often, an investment can be wrong or things don’t always go as planned. Having carried out a side hustle using your own resources and getting assurance that it works is ideal before you mass invest other people’s money in it.

Use the funds for the right reason.

Borrowed money isn’t your money. It’s peoples’. This is why you should use it for the right reason i.e., invest and spend your profits. After repayment of what doesn’t belong to you. Using loan money for the wrong reasons is the start of your failure to pay it back. Whatever wrong reason you are using the money for, will not regenerate it back with a profit.

Read also: How to find the right business idea.

Separate business and personal finances.

Business funds belong to the Business while personal finance is your money for day-to-day activities. Personal funds are spent on one’s self. In case you combine the two, you may end up spending business money unnecessarily hence failing to re-pay the loan.

Prioritize loan repayments.

Given the negativity of failing to pay back the loan i.e., “loss of your security”, loan repayment should be a priority. Making loan repayment a priority makes you pay your loans on time. In case you want more money next time, the lender is willing to help you out.

Always have a genuine plan B.

Plan A is the business or investment that you think shall bring you money to repay the loan. Investment is a risk. In case the worst happens, you need a savior. That’s your plan B. An alternative source of income that can raise money for the loan repayment. It shouldn’t always be security as it may carry a lot of value. Or be a treasure that you wish not to lose. Plan B can always bail you out.

Read the terms and conditions and understand them.

This is another of the considerations to re-pay your loan because it is common for a lending company to have bad terms and conditions. You can get to know these by reading the terms and conditions well before signing. Most people just sign because they want the money. You shouldn’t do this. I’ve read some terms and conditions from some microfinance companies that state that “you’ve sold your property” (security). That holds for whichever money they’ve lent you. This isn’t right. And you shouldn’t sign given such terms and conditions.

Read also: How to raise money for your side business.

Conclusion.

Loans are good as they provide means of raising capital for our side hustles. The bad side of them is evident when you fail to repay them. Consider these raised considerations to re-pay your loan and practice them not to get into such a situation.

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