First: calculate!

When deciding to take out a personal loan, you must first calculate how much you absolutely need to make sure you’re not overestimating and loaning an amount you’re not capable of paying back. Even though lenders will do necessary work to make sure you’re a good candidate for a loan, it’s better to run your own numbers so you’ve got a good handle on your finances.

Start by determining how much you’ll borrow and how much cash you earn. Alternatively, you can use a personal loan calculator to get an idea of what your regular payments will be and decide there whether or not you can realistically pay for the loan.

Review your credit score

Lenders typically check your credit score to assess your loan application. There are loan providers that require you to have excellent credit for them to provide the best interest rates and the most ideal loan terms. However, if you find yourself with a low credit score, you can go to loan providers that offer bad credit loans to increase your chances for approval. If rates and fees are still unfavourable, it’s best to improve your credit score before applying.

Check your options

When getting a personal loan, you can choose from a variety of routes depending on your credit situation. You may need the help of a co-signer to get you approved for a loan to get decent interest rates or you can get a secured personal loan and use your vehicle or house as collateral. Make sure to choose the option that will help you get the best outcome.

Choose your loan type

When you’ve calculated how much you can borrow and what you can afford to pay off, you can now choose the type of loan best for your situation. Some lenders are flexible in terms of how you use the funds, while some may approve loan applications if the money is used for specific purposes. Be clear on the intentions behind your loan. Are you borrowing to pay for medical expenses or do you need to finance a home renovation project? Whatever the reason is behind your loan application, you need to work with a lender who is comfortable in lending you the funds specific to your needs.

Compare lenders

When choosing a lender, we need to emphasise that you should always make informed decisions. It helps to compile a list of available providers and compare them with each other so you can shop around for the best possible interest rates and get an idea of where you will qualify best. You can either apply for a personal loan from banks, credit unions, peer-to-peer lenders, or loan providers. Compare lending fees, interest rates, and charges and always look out for hidden fees! Remember, great rates don’t mean much especially when a provider profits from adding hidden costs.

Ask questions

When in doubt, always ask. You can always ask your finance provider about the specifics of your loan application. Call them, talk to them in person, or chat with them. Whatever way that is, you should communicate your concerns and know exactly what you’re signing up for.