Taking out a personal loan for any amount is a financial commitment that may span over as many as seven (7) years.
There are many things to consider before you make a commitment to anything that affects your financial situation both now and in the future.
Consider the overall cost – Can you afford it?
With some financial products there is potential for paying interest. Interest can be at a variable or fixed rate, so you need to decide which option suits you and your future needs. With interest comes an additional cost to you too, so are you prepared and can you pay extra money later for the money you want now. Do you have a regular income?
Is there another way – Do you really need the loan?
Are you a spender or a saver? Is there another way that you can obtain the item you want without having to get a loan?If you are able to save money for the items you want, are you able to wait that extra bit of time before you purchase what you want?
Consider the item or thing you want – Is it absolutely necessary?
Do you really need the thing you want to use loan fund to buy. Will it be an asset that is going to help you in anyway right now and will there be an option to sell the item later if you run into financial trouble with the loan (yes, it happens). Do you absolutely need this item right now?
Where to obtain the loan – Have you shopped around?
Have you compared loan interest rates at different financial institutions? Are you going to a bank or using another financial lender? Have you researched all the information you need to have with you to apply for the loan?
How much is it really going to cost – Do you know about additional fees and charges?
Have you researched the personal loan product? Do you know if there is a monthly fee associated with the loan account? Is there an establishment fee? Are there any other costs to you either before you obtain the loan or for the life of the loan? Is there a fee for making extra payments or paying out the loan early?
There are many things to consider before taking out a personal loan. It is a liability that may carry over many years depending on the term you have chosen.
The most important one is do you really need it and if you do, can you pay it back without compromising your financial situation.
The decision to take out a personal loan is a big one no matter how much money you want to borrow.