8 Things to Think About Before Taking A Personal Loan

If you are considering taking out a personal loan, it’s a good idea to do some research first before signing on the dotted line.

15:59 25 October 2022

If you are considering taking out a personal loan, it’s a good idea to do some research first before signing on the dotted line. After all, a loan is a big financial commitment, so you need to ensure that you find the best option for your needs. 

 

With that in mind, read on to discover the 8 important questions you should ask yourself before locating a lender. 

 

How much do you need?

This is perhaps the most crucial question, as many lenders have a minimum amount they are prepared to loan. If you require fewer funds than this, it’s probably best to explore alternative ways to raise the money. 

 

How do you find the right loan?

It’s important that you choose a personal loan that suits your financial situation and your unique requirements. 

 

Fortunately, finding the right option shouldn’t be difficult as you can use a fast, free loan comparison engine such as LoanScouter.com to locate the ideal lender. 

 

How much interest will you have to pay?

When taking out a personal loan, you should try and find one that has as low an interest rate as possible. Unfortunately, certain factors - such as your credit score - will determine the size of the rate, so if you have a poor score it may be difficult to find one with low interest. 

 

How long will you have to repay it?

Once you take out a loan, you will typically have to start repaying within a month of signing on the dotted line. The duration of your repayment can vary dramatically from one lender to another; if you feel you will need more time, look for a loan that can be repaid over several years, rather than months. 

 

Are there fees involved?

Some lenders will charge you a sign-up fee when you first take out the loan, so this is something else to be aware of. This one-time payment can be between 1 and 5%, which could set you back more than you can afford. Doing your research is vital as you will probably want to avoid loans that come with additional fees. 

 

Can you make the monthly payments?

When you urgently need money, it can be tempting to leap at a generous loan without pausing to consider the reality of the commitment. Before committing to a lender, you need to honestly evaluate your circumstances and assess whether or not you can make the monthly payments until your loan has been paid off. 

 

Do you have a good credit score? 

A decent credit score is very important when it comes to taking out a personal loan and, in fact, you may be refused one if your score is too poor. 

 

While there may be some lenders who will take a chance on people with a bad credit rating, it’s possible that they will charge you more interest than customers with a solid score. 

 

Are there other options? 

Finally, you should take some time to reflect on whether you really do want to take out a personal loan, or if it would be best to explore other options, such as a balance transfer card or a payday loan. Make sure you are absolutely certain of the right course of action before committing.