Many businessmen tend to commit several mistakes when acquiring a new loan. They may emphasize solely on the interest rates and overlook the remaining terms and conditions. Although the interest rate may be critically important, there are other essential things to take into account.
There are many factors to consider when acquiring the loan for your business. You may consult lending institutions such as Ikano Bank to get better deals. Nevertheless, before finalizing any deal, you must consider the following factors to protect your financial needs and interests.
- Term of loan
The term means the duration of a loan. This essentially means that the period for which loan will be provided. It is an important factor to consider since it will determine the borrowing costs. If the term of the loan is higher, then it may result into more borrowing costs. Although it may help ease the case flow issues, you will have to pay a higher price in the long run. Therefore, it is essential to consider the term of the loan.
- Amount of loan
This is a no brainer. You need to know the amount and size of the loan. For instance, if you are taking a loan for a particular business project, then consider the percentage of the project’s cost which will be financed by the lender. This can help evaluate the amount of investment that must be made. You can explore different lending options and flexibility within it if you know the amount of the loan.
- Payment plan
It is essential to know how flexible the lender is going to be when it comes to repayments. There is always going to be ups and downs during your repayment. These unforeseen circumstances need to be covered in the loan contract. For instance, in case of an event which is out of your control, you are not able to pay the installments on time, will the bank be willing to suspend the same? Consider these factors and then make your choice.
Choose whether you want to go with secured or unsecured loans. Unsecured loans come with higher interest rates. On the other hand, secured loans provide lower interest rates but they secure a collateral against the loan. This can include any property, either movable or immoveable, such as equipment, machinery, bank accounts, real estate or bank guarantees. You need to negotiate with the bank with respect to the collateral you want to secure.
- Lender’ reputation
This is an important factor to consider whenever acquiring a loan. Not all lenders have a favourable reputation. This may be due to the stringent terms and conditions which go against the borrower. Therefore, you must go through customer reviews in order get practical insights into the experience that the customer went through. Further, compare between the different pros and cons of different lending institutions. This will help you make a more well informed decision and make the right choice.