Most of us could think of a reason for taking out a loan. Right now there are probably hundreds of good ones just waiting.
How about an exotic holiday, or a new car, campervan, or boat?
Maybe your son or daughter just called with the great news they are getting married and they’d love you to help foot the bill.
It could be any number of reasons, but does it make sense?
Do you need it? And if you do, can you afford it? Last but not least should you do it?
Consider the Alternatives. Does it have to be a loan?
A small need for a short time could well be taken care of with an overdraft or even a sensible use of the credit card.
That probably only applies to those of us who pay off the credit card at the end of every month. You know who you are!
How much do you need to borrow?
This could be up there with how long is a piece of string, but make this a realistic figure.
Once the happy couple have fled, once the boat is being wintered, and the car has depreciated, you will still be paying for it.
Can you really afford it?
This is either the clincher or the deal breaker. You need to do the sums here. Someone else will, and you may as well know exactly what you can afford.
There is no point applying for a loan that will be refused because of your credit rating. Multiple applications turned down means bad news for your future ratings. It’s easy to find out where you stand.
How much is it all going to cost?
Any reputable company offering personal cash loans will be able to tell you the cost. It will depend on a number of factors, such as the duration of the loan and the all important APR.
It is a good idea to understand the figures. The APR will allow you to shop around and make sure you are getting the right deal. There are different lenders out there, with varying costs.
What for example will be the initial setup costs? What are the penalties for missed payments?
Add in your current outgoings
This may not seem relevant, but it can be great financial practice. Add up all your current weekly and monthly outgoings. Include everything from credit card payments to utility bills and taxes.
Do you treat yourself to a daily latte? Put it in, it’s an outgoing. Don’t forget items such as groceries, fuel and insurance. If you pay it out, put it in.
Now redo your repayment sums. This will give you a real idea of how much you can afford.
Great! You may have decided that a loan is the right choice for you.
You have checked your credit rating, and ensured that you understand the small print details.
Some lenders use an asset such a home for security.
Whatever you decide to do, enjoy it, knowing that you’ve really thought it through.
