Should you take out a personal loan?
If you find yourself in a situation where a bit of extra cash is required, it can be difficult to know where to turn or which products to choose. There are many reasons why you might find yourself in this position, and regardless of your circumstances, it’s important to understand the personal loan options available. It’s also important to consider whether a personal loan is appropriate for you, your financial situation and needs. To help make this decision, there are a few key questions that you’ll need to answer.
Is the loan necessary?
First and foremost, you’ll need to decide whether a personal loan is truly necessary. Is it for something that you need right now or something that can wait until you’ve saved enough money to purchase outright? While wanting to buy an item soon can be a tempting reason to take out a loan, in the long run it may not be a financially responsible approach and will end up costing you more when interest is taken into account.
At the same time, there are plenty of situations where a personal loan makes sense. An example of this is consolidating debt. If you have multiple loans that need to be paid off – each costing you interest at a range of different rates – it may make sense to take out a loan and pay them all off. Consolidating loans can simplify your debts by combining them all into one loan to repay, potentially providing a new interest rate that may be lower and you should save money on interest. Similarly, if you need a particular item – such as a car – for work, taking out a loan can help you quickly get onto the right track.
Can you afford the loan?
Once you’ve worked out whether or not a particular loan is necessary, you’ll need to decide if your income is high enough to afford the repayments. You could do this by creating a budget that includes your regular expenses as well as the costs of the loan repayment.
After you’ve done this, you’ll have a much clearer idea of how capable you are of quickly paying off the loan. If your budget shows that you’ll only just be able to cover regular payments, as well as your rent, food and other living costs, then it might be better to hold off on the loan or revise your budget to ensure you can meet your obligations.
Have you done your research?
Finally, before taking out any type of loan, it’s important to understand what your options are. For example, if you know that your cash needs will be ongoing, it may be best to take out a dedicated line of credit rather than a specific loan, to avoid paying the associated fees multiple times. Similarly, if it will take you a while to pay off the loan, perhaps choose a fixed interest rate that will guarantee your payments remain the same.
Regardless of your individual needs, the team here at Beyond Bank are here to help. To find out more get in touch with us today.