So you’re looking at getting a personal loan. There might be a thousand reasons. You might need the money for a car, to fix a couple of things around the house, bolster your savings for a holiday. There are a couple of important things to consider when looking at personal loans, here’s some of the ins and outs of the process.
Are You Viable?
Before even looking at credit checks and rating, you need to consider whether your finances are going to be able to cope with a personal loan. Just because you can get approval, doesn’t mean you’re really going to be able to pay off the loan easily. Think about whether you can find a couple of hundred dollars extra a week, whether you want to be paying all that interest, or perhaps delaying your plans and saving for them instead.
How’s Your Credit Rating?
Then, of course, you need to qualify. Credit ratings are difficult things- that time five years ago you weren’t so great at paying off your credit card, or you lost your video from Civic ad never paid off the fine. Your bank will tell you, and it’s important to remember that credit ratings only last for seven years. Certainly, there are bad credit personal loans but it’s worthwhile to be very wary about what they offer. Better to invest the time in improving your credit score.
How Much, How Long?
If you qualify, you need to think about the nature of your loan. Personal loans go from $5,000 upwards and are generally available over one to seven years. Obviously, paying it off in one year saves you on interest but is a significant financial chunk out of your weekly income. The reverse is true paying it off over seven, you’ll only have a small outlay on a weekly basis but pay more in interest.
Fixed Or Variable
Personal loan rates are still far higher than official interest rates, generally sitting somewhere around 15%. If you fix your interest, you’ll know exactly what amount you’ll be repaying over the course of the loan. You can budget around it and avoid defaulting. If your loan is a variable rate, then you can’t predict what you’ll be paying a year from now. The advantage of a variable rate is that you can redraw on whatever you’ve paid without penalty.
Documents And Figures
In order to qualify, you need to have three months continuous employment. You also need a work history for the past two years, including business addresses and phone numbers. Your last two tax returns could also be quite helpful. Before you head in to apply, you’ll need to have a rough idea of your weekly expenditure and your household contents’ value.
You also need to consider whether you want to invest in loan protection. For an average of $30 a month, loan protection will cover your repayments for three months should you lose your job through no fault of your own, or an unforeseeable emergency crops up. It’s worthwhile considering the state of your finances, and whether loan protection would be a sensible move.