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Five tips for getting a personal loan

11th October 2017 Print

A personal loan can be a great way of reaching a short-term financial goal, such as purchasing a new car, renovating your home, or even paying off your current debts faster by consolidating them into one payment. However, before taking out a personal loan, there are several important factors that you should take into consideration to help yourself make sure that you are getting the best deal for your money. Along with that, before getting a loan, you should also be sure that you’ll be able to comfortably afford the repayments and that there is little chance of you hitting financial difficulties in the future as a result. 

We’ve put together some tips to help you make a smart decision when borrowing via a personal loan. 

Tip #1. Be Realistic with Your Budget

Loans come in all shapes and sizes. However, it’s important that even if you’ve been offered a higher amount, you only borrow as much as you need. Borrowing too much money will only mean that you have more to pay back in the future, so unless you’re planning to put the excess towards your future monthly repayments, then it’s not always a good idea. Along with that, you should also be honest and realistic with yourself when you are budgeting for taking out the loan in the first place. Go through your monthly incomings and outgoings to determine how much you’ll have left to repay your loan and use this to determine how much you can comfortably borrow. Don’t forget to leave yourself some disposable income for savings or emergencies!

Tip #2. Have a Clear Reason

Bear in mind that in many cases, people who borrow money probably could have gotten by simply by budgeting better and cutting back on unnecessary spending. Whilst loans can be the perfect vehicle to help you make a large purchase or investment, if you’re only thinking about taking out a loan to cover your everyday expenses, then you might want to reconsider it. Bear in mind that if you’re struggling to pay your everyday expenses now, you’ll likely find it even more difficult when you add a loan repayment plan to the mix. Try using helpful online money sites to find advice and tips about budgeting better and getting the most from your money. 

Tip #3. Do Your Research

Once you’ve decided that taking out a loan is the best option for your financial needs, it’s important to set aside some time to conduct research and ensure that you find the best product for you. With so many different loans available on the market, it can be all too easy to simply opt for the first one that you find or the financial products that are currently being offered by your own bank. However, these may not be the best when it comes to rates of interest or the perks that many borrowers can enjoy. Use loan comparison sites and perhaps even speak to a financial advisor if you’re planning on borrowing a large amount of money. 

Tip #4. Consider Putting It Off

If you are planning on borrowing money to make a large purchase, then being comfortable with delayed gratification and putting it off for a while could help you save a lot of money in the long run. For example, if you are hoping to borrow money so that you’re able to purchase a new car, then waiting a few months whilst you put some money aside to save up for a larger deposit will allow you to borrow less and deal with a lower monthly repayment amount, causing less financial stress. Although the waiting period is never all that fun to go through, the payoff is always so much more rewarding when you can finally make that purchase you’ve been dreaming off since you’ll have worked hard to make it happen. 

Tip #5. Start Saving

Even if you’re not planning on borrowing a personal loan immediately, it’s a good idea to start saving as soon as possible. Once you know that taking out a loan is going to be somewhere in your plan for the future, putting aside a little bit of extra money each month for repayments can be very helpful and you’ll certainly thank yourself for it in the future. Even if you’ve worked out that you have enough in your monthly budget to make repayments to your loan, having some spare money set aside will leave you with more disposable income left at the end of each month. This can be stashed away for emergencies, put back into savings, or used to drive your loan balance down even further. 

Were these snippets of advice useful for you and your financial situation? We’d love to hear more from you, so leave us a comment!