Is getting a personal loan a good idea?
If you find yourself in need of cash in hurry, it can be a tempting prospect to reach for a personal loan. Before your launch yourself into a loan agreement, it’s important to consider if a personal loan is the right choice for your circumstances.
We’ve created a basic rundown on what to expect from a personal loan and how to proceed with caution.
What Is A Personal Loan?
First things first – what exactly are you signing up for with a personal loan?
A personal loan is an amount of money you can borrow from a bank, credit union or online lender. You can put this money towards just about anything – purchasing a car, funding your wedding or consolidate debt.
This money must then be repaid over a period of time, with interest charged on top of the initial amount. These interest fees, and repayment amounts and terms, can vary greatly from lender to lender.
Things to Consider Before Getting a Loan
Are the repayments manageable?
It seems basic but the lure of personal loans can be a great way to sidestep the impulse control that might usually stop us from making large purchases.
Once you’ve signed on the dotted line for a loan, you are locked in to making regular repayments, plus interest. If this isn’t something to can comfortably manage weekly or monthly, perhaps reconsider the necessity of your loan.
Do I need this right now?
A major benefit of personal loans is the speed at which the funds are released into your account – often within a matter of days.
If your need for the money isn’t immediate, perhaps consider implementing a budget instead. This way you can accrue the funds over time and avoid the cost of interest and loan processing fees.
What am I purchasing?
There a few scenarios that personal loans can be beneficial in. For example, funding large one-off purchases that require upfront payments. These could include holidays, renovations, or a transport option.
However, personal loans are not a great idea when it comes to financing purchases that would qualify for a better loan type. For example, a house, car or student loan.
Benefits of Personal Loans
Unlike home loans or student loans, you can put your personal loan towards essentially anything you like. They can be great for solving emergency financial needs like medical expenses or vehicle troubles.
Personal loans can be an effective way of paying off multiple existing loans and combining the outstanding amount into one repayable loan. This avoids paying interest on multiple loans at once and can make repayments more manageable.
Do Your Research
At the end of the day, it’s important to ensure you aren’t ripping yourself off in the long run. It can be tempting to rush into the first personal loan you’re offered. But if you don’t read the terms carefully, you could end up damaging your credit score and paying exorbitant interest fees. Always shop around to make an informed decision about the loan plan with the best terms for your circumstances.
If you’re unsure of where to start, our friendly team are always available to help you compare and select the best personal loan plans on the market.