7 Things You Should Do Before Getting a Personal Loan
A lot of online information pieces about personal lending focus on the things you should NOT do and the MISTAKES you should avoid when getting a loan. Although these tips are useful, we found it’s often easier to be shown what to do instead of what not. We know there is the saying that you learn best when you learn by your mistake’s. But when it comes to your finances, we think it’s best not to risk it. This is why we have compiled a list of seven key things you should do before applying for a personal loan.
Getting a personal loan is a big decision that can affect your life for years to come, this is why you should consider shopping around before you get one. We know how easy it can be to just settle for the first major bank you see, but this might not be the best option for you. You can quickly search online for other banks, financial institutions and Credit unions, that can offer competitive rates and flexible packages that might be better suited for you. Using terms such as “Personal Loans” & “Debt Consolidation” in Google, you will be amazed at the array of services that could better benefit your lending needs.
Assess Your Assets
When borrowing money, it is quite common to offer an asset as a security. Doing so can be great for both parties as a security helps lower the interest rate for the borrower while also reducing the risk of the loan for the lender. So before you decide to take out a personal loan, you should determine what items you have of value that you could offer as a security for the personal loan. Whether it’s a car, a boat or even an expensive piece of jewellery, offering an asset that is of worth can do you favours in lowering your interest rates and making more manageable payments.
Work out an Appropriate Repayment Period
This is something you can do on your own or with a helpful lending team, but working out how long you want to pay off the loan is important. Some people prefer an aggressive approach by selecting a shorter tenure, meaning they pay larger amounts weekly and get it over and done with quickly. Others select a longer tenure which allows them to have smaller more manageable payments, meaning they can stay on top of their payments easier. Both, however, have their drawbacks as longer repayment periods mean that interest has more time to compile and shorter periods have an increased risk of missed payments and having additional arrears payments added on as a consequence. You should assess your situation and determine a manageable payment amount that you could achieve and just stick with that.
We have handy personal loan calculators on our website that can help do this for you.
Don’t Submit Multiple Applications
Well, this is a more or a ‘do not’ instead of a ‘do’, but you shouldn’t submit multiple applications at once. This is a mistake many people do when applying for personal loans as they hope that doing so will leave them with multiple offers or deals for them to choose from. This in fact damages the offers you may receive as numerous personal loan applications reduce your credit score! Yes, it lowers your credit score, when businesses conduct their credit checks on you for your loan application, they will see that you have applied to other financial institutions. This poses a risk to the lender as it appears that you have been rejected from multiple agencies, even if you haven’t yet.
So this is why you should go back to our first tip and simply shop around instead of jumping right in, and by shop we mean to look at, of course.
Check Your Credit Score
Checking your credit score is very important because it can give you a good indication as to what rates you may be offered or if you would even qualify for a particular loan. Although your credit score can be found out when you apply for a personal loan, as said earlier, this can negatively affect the score. This is why you should find a service provider that can offer a soft check of your credit score.
A free service provider that can do this for you is www.creditsimple.co.nz
Doing this will then allow you to get a ballpark figure as to what institutions will work for you. Remember, major banks may not be the way to go as they often have high credit thresholds. Evaluate your options and find out what institutions will be willing to give you the best deal.
Have Your Payments Sorted
Before you borrow any money, you should assess whether your current payments and finances are in order. Are you managing your mortgage? Is your car loan up to date? Are you able to pay all your bills and costs on time? Assess these other financial commitments burdens that you may have, ask yourself whether you can afford to add any extra on top. If so, then great! Follow our other tips and find the right personal loan for you. If not, then consider holding off on applying for those extra funds and instead consider sorting your finances first.
A Debt Consolidation loan could be the tool you use for this as you would be able to combine your current debts into one and relieve some stress by only having one lump sum payment.
Some people might feel embarrassed discussing money matters with others, but you shouldn’t. Nearly everyone gets a personal loan for at least one thing in their life, so don’t be afraid to ask where others got their loan. Listen to others suggestions but don’t just keep rates and fees in mind. You should make customer service a priority as if any circumstance of your application changes during your repayment period, you will want to have an institution that is flexible for you. Being able to speak to local people about your personal loan can be beneficial in making sure the right plan is developed for you. Overseas Contact Centres and foreign shareholders can cause conflicts of interest for the services that your local Credit union can offer.
Ask your friends and family on who they recommend for a personal loan and find out what will work for you. And well, if you need a place to start your search, we will be more than happy to recommend our website.
Visit www.nzcusouth.co.nz for more information regarding personal loans and other services we could provide for you.