Are you in need of an instant cash injection? If so, you are probably considering a loan. Be sure to ask yourself the following important questions before you go ahead and approach your bank or a trusted lender.
1) Am I borrowing money for the right reasons?
By taking out a loan, you will be putting yourself in debt. Not all debt is bad debt, however. Therefore, if you know that the money you receive will help you achieve your goals or further your education, you can be sure that you are borrowing money for the right reasons.
If you are considering applying for extra financing because you really want to buy a brand new sports car, despite the fact that your old vehicle is still in good working condition, then you may want to think twice.
2) What type of loan is best suited to my needs?
There is a wide variety of loans available, such as payday loans, business loans, and personal loans. Obviously, the type of loan that you opt for should fit in with your goals and suit your reasons for needing a loan in the first place.
If you require a small amount of cash to buy a larger item than what your budget allows ahead of payday, and you are able to pay it back quickly, then a payday loan is ideal. On the other hand, if you need to borrow a higher sum and you require a longer period to pay it back, then a personal loan might be the better route.
It is also important to note that some loans come with terms and conditions related to how you spend the money. For instance, some personal loans will not be available for business expenses.
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3) How much do I really need?
It is a good idea to avoid applying for a higher amount of cash than you actually need. Remember that you will be paying interest on every cent that you borrow!
With this in mind, be sure to sit down and do the math to generate an accurate number that you can present to your bank or chosen lender. These calculations are especially important if you are taking out a debt consolidation loan to consolidate all of your debt.
4) Can I actually afford the monthly repayments?
If you take out a loan and you are unable to make a repayment, or you make a late payment, you can be certain that this behavior is going reflect on your credit record. Bad credit will make it difficult and sometimes even impossible to obtain funding in the future.
In the event that you do find a lender who is willing to assist you despite your bad credit, you are guaranteed to pay infinitely higher interest rates as a result.
In short, be diligent about paying back the money that you owe. If you already suspect that you probably won’t be able to afford your repayments before you apply for the loan, the risks just aren’t worth it.
5) What is my credit score?
Speaking of credit scores, it is worthwhile to investigate your current credit score before applying for funding. Yes – you will have a score even if this is the first time that you are taking out a loan. The good news is that gaining access to your credit records is fairly simple. You can do so online, and many of the websites that offer this service are free to use.
Ask a financial expert for more advice
Remember, if you are unsure about the process of applying for a loan or which deal is best for you, don’t hesitate to consult with a financial expert for advice.