Should You Get a Quick Loan for Your Business?

Here’s What You Must Consider

A loan, used correctly, can be such a wonderfully helpful thing to have. It can help you make purchases and investments that your business might have to wait for, it can help your company out of a sticky situation, it can help buy a vehicle, real estate and so on, most businesses have at least some debt. With the offer of a loan comes the responsibility to make all of the agreed payments. If you fail to make the payments, it could affect your access to credit terms in the future.

So, should you get a loan?

Think

Check your savings, could you save for longer or is the matter pressing and you need the money right away? Are there other avenues that you could consider to fund the purchase or service? Asking family and friends could be an option for some but it can be fraught with problems. If you do decide to go down that route, make sure that you write everything down so that there are no misunderstandings, money can be the source of a permanent rift between family members.

Assess

You must look at your own particular circumstances and be prepared to be realistic with yourself. You should never take out a loan based on what you think your future circumstances could be, the promotion you have been promised or the job that has just not quite happened yet. You have to go with your present circumstances and even then, you need to consider how they may change in the future. Look ahead and consider what your lifestyle may look like in 6 months. Are you in a job that you don’t like at present or is the company’s future uncertain? Are you going to be making changes to your lifestyle and what impact will those changes make to the money that you have left after the deduction of expenses? Total your current expenses and remember to include all of your necessary bills and don’t forget to include the pleasurable expenses too, weekends away and the holidays, don’t forget to factor everything into the equation. The sum of money that you are left with at the end of the week or the month represents the amount that you could consider paying towards the loan, do not commit yourself to more than this as there would be a good chance that you will find yourself struggling at some point down the line. Imagine making a purchase or a home improvement and yes, it may be pleasurable to use or to look at but how would you feel about having to forego nights out, clothes or even a holiday. So, you have to think carefully about the nature of your purchase and what kind of sacrifice it may be worth. Obviously, if your loan is for an essential service like a leaky roof, there is little you can do about it and you may want to consider the term of the loan because by taking the loan out over a longer period of time, yes, you will pay more interest but it is also a way of keeping your weekly or monthly payments down which could make a difference in the longer term.

How do Loans Work?

If you are buying a house or a car, for example, you are purchasing an asset, you are likely to be offered what is known as a secured loan. A secured loan is a much safer way for a lender to offer money as the purchase or asset is offered against the loan which means that the lender ultimately has the power to take the asset from you and have it sold to recoup any costs. A car loan or a mortgage are examples of secured loans and they are one of the most popular types of loans. An unsecured loan is a personal loan and it can be used for any purpose, you do not have to discuss your purpose with the lender but the lender may want to see evidence that you can pay the money back. With a lender, it is all about risk and a secured loan is generally available over a longer time period and at a more favourable rate of interest. Interest is charged on most loans (unless you obtain interest-free credit options which can be offered for purchases in some large stores for example). Interest rates for loans vary according to the type of loan, your risk to the lender or your status, how long the term of the loan is going to be, and the lender themselves. You will be told what the rate of interest is going to be and you will be given a summary which details all of your payments and over how long, make sure you obtain this illustration so that you are clear about all of the terms and conditions. Interest rates are quoted as an APR which stands for annual percentage rate and it is a measure of the cost of your borrowing. You do not have to understand how it works but it is always worth keeping an eye on the percentage that you are quoted. If you add up all of your payments and then subtract the original amount of the loan, you are left with a figure which represents your overall cost of borrowing.

Research

You will have to find yourself a trusted and reliable lender and one which you can be assured will stick to the terms of the loan, like every industry, there are unscrupulous operators. You could ask around, family, friends, neighbours or you could check social media, your friends there or you could take to the internet and have a look there. You should check the reviews carefully and check the company’s website. The website should contain information about their products and loans in general, their application process and their customer service approach. If in doubt, you could give the customer service department a call and check the service for yourself. You should be able to tell quite quickly. The operator should be friendly in his / her approach and willing to answer any of your questions, no matter how trivial.

Apply

Once you have satisfied yourself that you have found the correct outlet, you can make an application and have your application assessed. You want that to be done quickly to save you hanging around and wondering whether you will be accepted for the loan, especially if your purchase or service cannot wait too long because if you are rejected, it means starting at the beginning again and looking for another provider. As long as you are creditworthy and can demonstrate the information according to the company’s requirements, there should not be too much of a problem. You can apply for Quick Loans if you are resident in New Zealand. They are ideally placed to offer loans quickly and effectively as they have systems in place to deal with your application very quickly, offering you quick decisions and even offering you the loan on the same day as your application. Look for a company whose application process is not too onerous.

Post Loan

Remember, as, with any loan, it is entirely your responsibility to keep your payment schedule. The lender will not appreciate payments which are not made on the due date. Most people and the lender may require it, pay their loan payment by direct debit directly from their bank, meaning that they can forget about the monthly payment as it happens automatically and takes the thought away from them. If you do happen to run into payment difficulties, you must contact the lender immediately, do not wait several months until the problem has become entrenched, there is little that can be done at that point. A reputable lender is only looking to be repaid and it is often the case that they can renegotiate your payment terms to allow you to more comfortably afford the loan, they could choose to increase the term of the loan for example or agree a payment holiday to allow you to catch up, there is a lot that can be done but if you do not alert them, they can do nothing. If you have a secured loan, remember that your car or house or whatever the asset is, can be repossessed and taken from you if you fail in your payment schedule and unpaid loans can lead to quite severe personal consequences for the borrower. It would mean that your credit rating could be affected which in turn would render it very difficult or impossible for you to obtain any form of borrowing in the future. So, treat your loan payments carefully and treat them as a priority ahead of your pleasurable interests which really don’t have to happen.

Conclusion

Take time, think carefully before agreeing to a loan, do your research, read the terms and conditions associated with the loan you are considering and don’t forget to keep up your payments.

Alex Hamilton