10 Questions to Ask Yourself Before Taking Out A Personal Loan
Do You Need a Loan?
If you are considering a personal loan it's imperative to see if you even need one. Do you have a savings account that you can dip into? If so, that might be a better option than opening up a new line of credit. After all, you may acquire interest rates with a loan.
How Much Do I Need?
Before you start searching for a lender, you should first calculate how much you need. Going over the math before getting a loan could save you from unnecessary credit. When getting a loan, it’s important to get exactly the right amount. Getting more than you need could harm your credit score if you don’t pay it back.
How Much Should I Borrow?
When looking for a loan, you need to calculate how much you need to borrow. Once you find out how much you need, see if you can dip into a savings account or sell something to lessen the amount that you need to borrow. This could help save you from unnecessary interest.
What Am I Using This Loan For?
What you are going to use it for should be important. Most times, people don’t take out a loan for something like a trip. That is what credit cards are for. Instead, a loan should be for important things like paying for education, repairing your home or getting a reliable vehicle.
When Will I Repay This Loan?
Most loans have specified periods in which they need to be repaid before interest is compounded. Once the interest starts, it doesn’t stop even if you meet your minimum payments. Setting a budget and working on a timeline can help you pay back your loan quickly. Be sure to look at when the lender expects payments.
Is My Credit Good Enough?
Sometimes, you may not have adequate credit to receive a loan. If you have a history of not paying back debts you may not be qualified to even go through the application process. Be sure to know your current credit score before continuing. You can always raise your credit score with a secured credit card.
Will I Need a Co-Signer?
Most loans will require a cosigner. It can be a spouse, family member, or in some cases, a friend. Be careful who you choose as a cosigner as they could go after them if you refuse to pay. This can harm relationships so be careful to watch out for that.
Should I Borrow From Family?
Speaking of harming relationships, one should be careful when borrowing from family. Never borrow from a family member unless you fully intend to pay them back as soon as possible. Some family members may choose not to lend to you, so be sure to understand their reasoning.
Is My Lender Trustworthy?
There are lenders out there who might not be trustworthy. Make sure to search reviews of different lenders and never lend from companies with a bad reputation. One should also avoid lenders who will require you to put your car up for collateral. There are also lenders who will overcharge for loans so be sure to ask for their rates.
What Rates Do I Quality For?
Depending on your credit score and lender, there are a variety of rates that you could qualify for. One cannot get an accurate estimate on this without speaking to a lender and getting a sample or estimated rate. Interest rates can be as high as 200% for payday loans, or as low as 5% for credit bureau loans. Your rate depends on your type of credit and your payment history.