Everyone’s personal and financial situations are different and sometimes life hits you in the face and you need a loan. Loans can be a great idea if you end up in a tight situation with a large bill to pay or other unexpected expenses. Personal loans can also help reach a short term goal like buying a car, holidays or consolidating your debts into one repayment.
When thinking about getting a personal loan there are things you need to consider:
- Review your budget
Be sure to review your budget before you even think about applying for a loan. Make sure you are realistic with your expectations. If you work out your budget and you don’t have much money left after bills and expenses, you may struggle with the loan repayments. Don’t put yourself under unnecessary strain and set realistic goals.
- Budget for making extra repayments
Plan to make extra repayments on top of the minimum loan repayment amount. This will allow you to pay off your loan quicker and lower the interest you pay on the loan. Paying less interest and will also look good on your credit rating.
- Secured or unsecured personal loan
Decide whether you want an unsecured or secured personal loan. Both have their good point and bad points. A secured personal loan is usually secured against a car and can have lower interest rates. An unsecured personal loan can be a simpler application process but higher interest rates and stricter eligibility criteria.
- Do your research
Make sure you research different options to find the best loan that will work for your circumstances. This will allow you to avoid making multiple applications to lenders which can have an impact on your credit rating.
- Know your credit file
Make sure you are aware of your credit history as this will have a big impact on whether you will be approved or not. Get a copy of your credit file and take note of your credit score, credit enquiries and if you have any defaults.
Things you will need to consider when researching personal loan lenders:
- interest rates
- annual fees
- term of the loan
- Impact on credit rating
- Personal loan repayment flexibility
- any other terms and conditions that the lender may have
Before getting a personal loan, make sure that you feel confident about your financial situation and do your research to find the best option for you.