Can you get a loan? Should you get a loan?

The best choices are always made when you have enough information to make the right decision confidently. So, if you’re unsure about getting a loan or not, read on.

A personal loan can be a fantastic, liberating tool when used correctly. Think about it this way: it’s like saving in reverse. Instead of saving every month towards your goal, you achieve your goal the moment your loan is granted, and your monthly payments go towards taking your balance down to zero.

Is getting a personal loan a good idea?

If you choose to take out a loan, you obviously want to try and get the lowest interest rate you can. This makes the loan more affordable, and means you pay back less over the life of the loan because of the lower rate.

But to get the best interest rate you will need a decent credit score. Maintaining a respectable credit score is a life-long quest that is made much easier when you pay your bills on time.

If you don’t, then your score could fall below acceptable levels, making it difficult to get affordable credit in the future. Also, clearing black marks like late payments off your credit record doesn’t happen overnight. Defaults on payments can remain on your record for years, even if you’ve settled your debts and now pay your bills like clockwork.

It’s always makes sense to do your research when looking for a solution that’s going to be the best fit for what you need

By maintaining a clean credit record, you give yourself the best chance of getting the loan and getting the best interest rate. A lower interest rate means the total amount you pay back on the loan will be less than that of someone with a low credit score who would have a higher rate.

So, even though a lower credit score doesn’t automatically stop you from getting credit, it could mean you’re offered a loan at a higher interest rate. It clearly costs less if you manage your money carefully.

Take the loan for the right reasons

Once you qualify for a loan, the next big decision is whether you should take it. This is a very personal choice, but there are times when it makes absolute sense to draw on this resource.

Another way to think about it is the saving-in-reverse analogy: if you had time on your side, you could save every month until you had enough money to buy what you need. But time isn’t always a luxury you have. For something you need right now a loan is a sensible solution, if you can afford it.

It allows you to take care of immediate needs and then ‘save up for them’ afterwards. Because you are paying administration costs and interest, of course, you will need to ‘save up’ a bit more when you do it ‘in reverse’. Your decision may hinge on whether your personal need is urgent enough to justify the extra cost.

Know your loan provider

It always makes sense to do your research when looking for a solution that’s going to be the best fit for what you need. And it’s never a good idea to take a loan if you’re not sure you can keep up with the payments. That’s why it’s important that you only deal with reputable and regulated financial services providers.

Responsible lenders will never tempt you into credit agreements you can’t afford. Stick with a trusted lender to ensure your legal rights are protected.

Disclaimer: This blog is for informational purposes only and is not legal advice.