What to consider before taking a loan this new year 

By Herwin Tsowaseb

The beginning of a new year often comes with exciting possibilities, but it also brings significant financial responsibilities.

For many parents, January and February mark the time to prepare for university registration and tuition fees, purchase learning devices, and ensure everything is in place for the start of the academic year. Following the festive holidays and the “back-to-school” season, some may find their budgets stretched, making loans an attractive option to cover the additional expenses.

At Letshego Holdings Namibia, we understand the value of providing access to financial solutions, but we also believe in empowering our clients to make informed decisions. Before you decide to take a loan, here are some critical factors to consider: 

Do You Really Need the Loan?

The first question to ask yourself is whether the loan is necessary. Taking on debt should be a last resort, not a first option. If there are alternative ways to meet your financial needs, such as using savings, adjusting your budget, or seeking assistance from family, explore those first. A loan is a financial commitment that comes with responsibilities and consequences if those responsibilities are not met.

Understand the Interest Rate

The interest rate is the cost of borrowing money and directly affects how much you will repay. Look for loans with competitive rates and ensure you understand whether the rate is fixed or variable. Fixed rates means that the interest rate remains the same throughout the loan term, while variable rates can change, affecting your monthly repayment. 

Determine the Right Loan Amount

It can be tempting to borrow more than you need, but this often leads to higher repayments and additional stress. Calculate the exact amount you require and borrow only that. Remember, a loan is not “extra money” but a financial tool to meet specific needs. 

Evaluate the Repayment Period

The repayment period is the length of time you must repay the loan. While longer repayment periods may reduce your monthly instalments, they often result in paying more interest over time. A shorter repayment period may have higher instalments, but it helps you clear the debt sooner. Choose a repayment period that balances affordability and long-term cost. 

Review Your Budget

Before committing to a loan, take a close look at your monthly income and expenses. Will you comfortably manage the loan repayments alongside your regular financial obligations? A realistic budget can help you avoid overborrowing and prevent financial strain. 

Understand the Terms and Conditions

Always read and understand the loan agreement before signing. Pay close attention to hidden fees, early repayment penalties, and default consequences. If anything is unclear, ask for clarification from your lender. A trustworthy financial institution will take the time to explain. 

Consider Your Long-Term Financial Goals

Taking a loan can have an impact on your long-term financial health. Think about how this decision aligns with your plans. Avoid loans for unnecessary expenses that do not contribute to your overall financial wellbeing.

Letshego Namibia is here to support you in making smart financial choices. Our loan solutions are designed to provide flexibility and transparency, ensuring that you can meet your immediate needs without compromising your financial future. 

If you decide that a loan is the right option for you, we encourage you to visit any of our branches or speak with one of our Direct Sales Agents or Consultants to explore options that fit your needs. Remember, financial literacy is the key to making informed decisions that benefit you and your family in the long run. 

This January, let us start the year with clarity and confidence in managing our finances. After all, a loan should be a bridge to opportunities, not a burden. 

*Herwin Tsowaseb is Head of credit at Letshego Holdings Namibia

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