Top Questions You Should Know the Answers Too, Before Getting a Personal Loan in 2020

A personal loan is a tool to borrow money during a short-term, to help with a financial problem that needs to be taken care of.  Typically you only want to get a personal loan, when you have no other options or ways to get the financial help you need in a timely manner.

The biggest benefits of getting a personal loan is that you can use the money for any reason you need, and without providing any collateral like other credit options.

With all financial products, before going ahead and getting one, you should have a good idea about it, and you should make sure that it is the right choice to make financially.   That is why we have created a list of questions you should know the answers to, before getting a loan online!

Here are the Most Important Questions to Know the Answers Too, before Getting a Personal Loan Online in 2020

Q1: How will this loan help you financially?

The first and most important question you should ask yourself is “How will this help me?”

Taking a personal loan can make sense in circumstances such as paying debts with high interest, as it enables you to pay your debts at a relatively low-interest rate.

Borrowing money via personal loans is also a smart finance option for paying big expenses such as doing essential house repairs.

But, if you are taking a loan for something that won’t improve your long term financial situation. Such as a big wedding or luxury vacation. Then, “Don’t take a loan” for such expenses.

For this, you can open a separate account and save money over time.

Q2: Are you eligible for a personal loan?

There are only a few things that you must have to be eligible for a personal loan.  Whether or not you qualify for a personal loan, is a different question, however it is very simple to know if you are eligible or not for a loan online.

The things you must have to be eligible for a loan in the U.S. are:

  • At Least 18 Years of Age
  • Be a U.S. Citizen
  • Have a Checking Account
  • Have a Future Source of Income

If you have these 4 things, then you are eligible for a loan!

Now to qualify for a loan is a different question, and that is different for every lender.  The biggest things effecting if you would qualify or not for a loan are typically your history with loans, your credit, and info about your current living situation and future income.  The only way to see if you qualify for a loan however, is to apply.

In case you are not aware of your credit history or want to learn more about credit, you can check out this complete guide for checking your credit score.

Q3: Are there any alternatives to try before getting a person loan?

A personal loan should be a last-resort to a short-term financial emergency that needs to be taken care of in a timely manner.  Before getting a personal loan, you should try to get the money needed in other ways first.  The best option is to have an emergency fund available to you.  If you don’t have an emergency fund setup, you should think about doing so!

Another great alternative, is to ask friends or family for the help, and that you will repay them.  This way you won’t be hopefully charged an interest.

Other alternatives are getting or using a credit card, or using your tax refund.  If you have a tax refund coming, but don’t already have the money from it, you can get a tax refund loan online to get the money you need right away.

Q4: What are the repayment terms like for a personal loan, and what monthly payments are affordable for you?

“How long you need this money for?” – This question addresses the time required to pay off the whole loan.

Now, while answering this question three different metrics come into play that you should consider:

Time: The total no of years or months you want the personal loan.

Interest rate: A certain percentage of money that is to be paid over time.

Monthly payments: This refers to the amount that is to be paid monthly as repayment for the loan.

The relation between the three:

  1. The longer the time, the less the amount for the monthly repayment, But this makes you pay more amount as interest over time.
  2. Choosing the shorter loan period eventually decreases the amount of interest. However, this makes you pay more money as monthly payments.

Keep in mind that the time for repaying your loan is your personal decision, select the duration that goes well with your future goals.

Monthly payments are the best metric for your affordability.

This also helps you in Identifying that sum that you can afford to repay.

Never choose a monthly payment option that is more than 30% of your monthly income.

Doing this will make sure that the personal loan will not negatively affect your lifestyle expenses as well.

Keep in mind; several different factors influence your monthly payment schedule.

Not only the borrowed amount but also the interest rate and loan length can affect your monthly payment as well.

A loan calculator can help you to check out the potential monthly payment options as well.

Q5: How much money can I borrow?

Once your credit score makes you eligible for the loan.

Then the next most crucial question is “How much do you need to borrow?”

Always add up all your expenses so that you can get an ideal sum for the loan.

For example, if you are borrowing the money for house repairs then add up the total cost and consider all the possibilities for any additional

Expenses required.

In case you are taking the loan for a specific project, then do your research and makes some estimate for the total expenditure.

In addition, taking little more than the total cost for some miscellaneous expenses is beneficial at times.

But, make sure to do your estimates properly.

Q6: What are the interest rates?

The interest rate depends on multiple factors.  They typically include your credit score, income and the total personal loan amount.

High-interest rate makes you pay more money as interest. On the other side, a lower interest rate will help you save money over the loan tenure.

An ideal choice would be to take the loan with the lowest interest rate available.

Q7: Are there any additional/hidden charges?

After finalizing the interest rate, loan tenure, and monthly payments. It is very important to check whether there are any added fees.

Sometimes, there are additional fees such as loan closing fees, lender processing fees, etc.

All of this information will always be shown clearly on your loan documents that you will need to sign before getting a loan.  So make sure that you read this document clearly and in its entirety before signing it!

Do You Have the Answers?

By knowing the answers to these questions beforehand, you can make sure that you are ready to get a loan, and can find the best loan available to you to meet your needs.

However, always remember, “Do not borrow unnecessarily” and do not opt for a loan without understanding its terms and conditions.

Make sure to keep all the answers clear in your mind before signing any loan documents to avoid additional financial trouble.

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