If you are looking for a personal loan for the first time, here are some tips to consider so that you can take out a personal loan, make sure the process goes smoothly, and that you do not get a loan that you have trouble managing.
Check Your Credit History and Credit Score
Your credit history and credit score may influence the interest rate on your personal loan and your ability to qualify for the loan. Before applying for a loan, check your credit history to look for errors and inaccuracies. Dispute anything that you find in your credit history reports.
You can get your credit score by signing up for a paid service. TransUnion Canada and Equifax Canada both give the credit score with their paid credit report services. Some online systems may offer a free-trial for credit-monitoring services, if you just need to see your credit score temporarily.
Make a Clear Plan About Using a Personal Loan
Personal loans can be used for nearly any need, such as: medical reasons, vacations, buying large items for a home, car loans, and for consolidating high-interest rate consumer debt on credit cards. Make a plan for what you want to use your loan and then you can figure out what the loan will cost.
Determine the Amount You Need
Carefully calculate the total amount of money you need. Unlike a credit card, which allows you to charge more, a personal loan is for a set amount. Be sure to include things like shipping charges, sales tax, and other items you may have to pay for to get what you need.
Make an Honest Evaluation of Finances
If you do not already use a monthly budget system, now is a good time to start using one. You can create a simple budget using a spreadsheet or there are online systems that make this easy to do. Itemize your income and all the monthly expense items that you have. Allow for any annual expenses or other things that may come up in the future during the loan term.
Make Sure You Can Afford the Payments
Calculate the monthly loan payment and make sure you can afford to pay this additional amount along with your existing budget. Determine if you need to lower some other expenses to accommodate the new monthly loan payment and make sure you can do this for the term of the loan without struggling.
The best advice about taking a personal loan can be broken down into a group of actions you should not do and steps that you should take. Chiefly, do not use a personal loan for frivolous reasons.
Do use a personal loan to pay for something you truly need or really want that will help you over the long term and be worth it to you. Do make a repayment plan. Consider the chance of an unexpected setback due to circumstances beyond your control. If you follow these basic steps, make a plan, and then make a good decision about a personal loan, the benefits will outweigh the challenges of paying back the loan.