Before taking out a personal loan, ask yourself the following questions?

 

Before taking out a personal loan, ask yourself the following questions:

1. Why do I need a loan? While it may be tempting to take out a loan to purchase holiday gifts for your family or upgrade your computer, personal loans should only be used for necessary expenses. Ask yourself whether you really need to borrow before applying for a personal loan.
2. What is the cost of borrowing money? Add up the total cost of borrowing, including all associated interest rates and fees, before making your decision. Compare different types of loans to ensure you’re getting the lowest possible rate. For example, it’s possible that a home equity loan would be less costly.
3. Can I handle more debt? If you’re already struggling to keep up with your expenses and pay down your current debts, a personal loan might make matters worse, unless you’re using it to consolidate existing debts. If you feel like you’re already trapped in debt, consider looking for additional income sources or utilizing government assistance programs instead of borrowing.
4. Can I afford the monthly payments? You should always consider your ability to repay your personal loan, which means calculating your monthly payment and factoring it into your budget. Use our personal loan calculator to estimate your monthly payment before committing to a loan.

While a personal loan can be a financial lifeboat in some situations, it’s not always the best choice. It’s important to note that there are also bad reasons to get a personal loan. Carefully consider all your options before signing any loan agreements.