There’s a lot to think about when it comes to personal loan shopping. Have a look at this short checklist before getting a personal loan.
Table of Contents
Is a Personal Loan What I Need?
First on your check list before getting a personal loan is to think about whether it’s the right kind of loan for you.
Personal loans work very well for situations where you need a quick influx of cash that isn’t necessarily tied to a specific purchase, as it would be with a credit card. For example, you might foresee upcoming medical expenses, but not be sure exactly what or how much these will be. In this situation, doing some personal loan shopping is a great way to find something more flexible that’s there for you when and as you need it.
Another situation in which you can’t use your credit card is, well, paying off your credit card! Personal loans are an increasingly popular way to consolidate debt. Rolling the revolving payment term and fluctuating interest rate of credit card debt into something with a stable interest and fixed payment term might be just what you need to get ahead.
Do I Have a Good Credit Score?
The second point to consider on this checklist before getting a personal loan is to ask yourself: how’s my credit? Like I mentioned earlier, personal loans don’t involve collateral. But lenders still need some sort of reinsurance that you’ll repay your loan on time and within the agreed-upon terms. That’s where your credit score comes in.
Generally speaking, a credit score of 850 is considered “excellent,” while anything in the range 725 to 800 is considered “very good.” Many lenders will be willing to offer loans even if you fall slightly below this, but any lower than around 700 and you may run into trouble.
What’s more, the higher your score, the interest rate you’ll be offered depends heavily on your credit score. Remember, the higher your score, the more confidence a lender has in your ability to stick to the terms. So they’ll be willing to give a better interest rate if you have a higher score.
If you fall within the “very good” range, you can expect decently favorable terms, but at 800 and above is where you can be pretty sure you’re getting the best interest rate you can.
Have I Thought About How I’ll Repay the Loan?
Before you dive in and start to loan shop, you should think about the steps you can take to make sure you repay the loan on time. Here are a few ideas:
● Create a Budget.
Assess your expected monthly income and determine the monthly payment you could reasonably expect to make. This will set the parameters for the size of loan and interest rate to look for when personal loan shopping. Find great budget tips on budgetry.com.
● Find Ways to Curb Spending.
You’ll need to make your monthly loan payments your priority. Be realistic about what you actually need to spend money on, and be willing to make certain sacrifices until the loan is repaid.
● Don’t Forget About Fees.
When you loan shop, be sure to factor in additional fees on top of the loan plus interest: origination fees, prepayment fees, potential late-payment fees, etc
Have I Adequately Shopped Around?
The last point on your checklist before getting a personal loan is this: make sure you shop around.
There are many different lenders, which offer many different loans with varying terms and interest rates. Take full advantage of Loanry.com as a way to comparison shop, and read more great tips to keep in mind when personal loan shopping.
Conclusion
Hopefully, after reading this guide, you’ll have a better idea of your answer to this question. If you’re still not sure, I invite you to look around at your options, and really dig into the wealth of information available online.