Three Questions You Need to Ask Yourself Before Taking Out a Personal Loan

Personal loans are a great way to give your bank account that extra boost in a time of need, whether you’re planning a home remodeling, looking for a new car, hoping to consolidate some debt or looking to take your family on a much-needed vacation. There are different types of loans, repayment plans and terms available to fit the need of nearly every potential borrower. It’s important to understand the complexities and effects of taking out a personal loan before you pull the trigger.

How Are My Finances / Credit Score?

Before signing up for a personal loan, take a look at your current financial standing, along with your financial history, as both will be considered by the lender when reviewing your application. Your credit score will also help the lender determine what interest rates and payment plans you qualify for.

Having a trustworthy credit and financial history of making payments on time, paying off credit cards or other debts, etc., will increase your chances of getting a larger sum at better rates.  It shows the lender that you are not a risky loan candidate and can be relied upon to pay back your personal loan in full.

How Much Do I Need to Borrow?

Personal loans may seem like a gift to solve your financial problems, but understanding your situation and being realistic about how much money you actually need will ensure you get the loan best suited for you. Borrowing more than necessary may lead to a pile of debt you aren’t able to pay back and that can reflect badly on your credit.

Borrowing limits will vary from lender to lender and depend on several factors, such as your credit score, income, liabilities and what you intend to use the loan for, so just because you ask for $1000, doesn’t mean you’ll get $1,000. Seek advice from a loan professional who will help evaluate your needs and the realistic loan options available for you.

What Are the Terms of the Loan?

There are several factors to consider when reviewing the terms of the proposed loan, like whether it has a fixed or variable payment rate, any origination fees, prepayment penalties and of course, the interest rate.

For many, the big question when considering a personal loan is, “How long will this take me to pay off?” The life of the loan or “loan term” is dependent upon your agreement with the lender and can vary from 3 months to 36 months. Be sure to understand how the proposed prepayment plan of your personal loan will impact other financial goals you may have, like starting a family or buying a house.

Call a Loan Professional Today

With so many factors to consider, taking out a personal loan may seem like a daunting task, which is why consulting with a loan professional is the best way to ensure your bases are covered. If you’re considering a personal loan, Citizens Finance is here to help. Whether you’re seeking debt consolidation, relief from medical bills or a new car, we can provide a custom loan to fit your needs.