How to make the best use of a Loan

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How to make the best use of a loan

It is often easy to think that a loan is not a loan and it is free money. Once it hits your account, several thoughts may go through your mind.

Using your loan wrongly is “carrying gbese” on your head because once the debt collectors come to take theirs which you owe, you would be unable to pay.

Before taking a loan, there must have been pressing needs that led to the decision. Meet those needs as soon as the money drops into your account, as soon as that alert enters, do not start rejoicing as if the money is yours. The money is a debt that you owe.

After your need has been met, when there is extra change, do not go around using that to solve secondary issues. In a situation where there are no primary issues to resolve, pay back the remaining money into the account of the financial institution or loan company where you collected the loan from. Although some financial institutions have penalties for early payment, some others are flexible like Creditville limited.

I’ve seen cases where people had to borrow money because the money they were expecting were not forthcoming and after they collected the loan and solved their issues; the money came. Some use the opportunity to offset their loans immediately while some hold on to the money and eventually spend it on things that should not have been on their priority list.

The best way to make good use of a loan is to use it for the purpose for which it was taken. A major DON’T in taking loans is using the loan for that which it was not taken for. A loan is not free money, it is not your money, it will be paid back eventually. Be smart about taking loans, or you stand the chances of losing properties for collateral loan and relationships for loans that require guarantors such as the Creditville Limited loan.

Steps to using a loan smartly:

Create a budget and plan for the loan before you start expenditure

A budget is a financial plan for a defined period of time, usually a year. Creating a budget for the usage of the loan would make sure you use the loan appropriately. Your budget should break down projects, needs, and investments that you intend to do with them. It should also include expected change if any.

You should also create your own repayment plan if possible so that when payday comes, it becomes easier.

Do not misuse your loan

Misuse in this context is wrong or improper use or misapplication of funds disbursed. When you collect funds to complete your house, do not use those funds to pay for something else except in a case of emergency. For example, life or death situations can make you divert funds and that would be understandable. It is extremely important that loans serve their purpose so you do not have to start running around when the time for repayment comes or worse still have to take another loan to consolidate your debt.  Although consolidation of debts can be done strategically, avoid it extremely.

What personal loans have in common is that you are using the money to invest in things that benefit you in the long term: your budgeting goals, your health, your car, your home and/or your business. You are not using the money for frivolities but actually things of extreme importance.

 

Do not spend any extra funds remaining after the loan has served its purpose.

Most times, people prepare to take more funds than they need, just in case of emergencies. In such cases, there may be extra money left after needs have been met. It is often tempting to spend money left on other issues around us. Bills pop up here and there every day and it could be tempting to use extra funds from the loan to settle those bills.

Instead, pay the remaining money back to the financial institution so that your principal can begin to reduce. For financial institutions like Creditville Limited, there is no penalty for early repayment and you can always liquidate when you have extra money.

In cases where the loan interest is calculated on the reducing balance method, early repayment would be advantageous to you as it would reduce the interest you would have to pay in the long run.

 


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