7 Things to Know if You Need to Get a Loan Now

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Believe it or not, about 78 percent of the US workforce lives paycheck to paycheck. If you’re one of them, you know that making ends meet every month can be challenging.

Taking out personal loans is always an option, but there’s more to taking out a loan than just signing on the dotted line. You need to make sure it’s the right option for your needs and your budget.

If you’re looking to get a loan now, make sure you’re prepared. Here are a few things every borrower needs to know before taking out a loan.

1. Think About Why You Need the Money

Before you start looking for a personal loan, think about why you need the money. Are you looking to pay down existing debts and get a lower interest rate or do you want to take care of a few home improvement projects that just can’t wait?

There are different types of personal loans and identifying how you’ll use the money can help you better narrow down your options. For example, if you’re buying a car, you could qualify for an auto loan. If you’re remodeling your bathroom, you could look into home improvement loans.

The benefit of using purpose-based loans is that you’ll typically qualify for a higher loan amount and a lower interest rate compared to payday or other quick loans. The lower the interest rate, the more money you’ll save.

2. Get to Know Your Credit Score

Did you know that your credit score is one of the key things lenders consider when determining your interest rate? The higher your credit score, the better and the more likely you’ll be to get a fair interest rate.

Unfortunately, the more debt you have, the lower your credit score can go. This means you’ll find it harder to qualify for loans in the first place. The ones you do qualify for may have lower principal amounts and higher interest rates.

Why? Because lenders view people with lower credit scores as higher-risk borrowers. Lenders hedge against this by charging you a higher interest rate (increasing the amount of money they make in the process) and lending you a smaller amount in the first place.

Check your credit score and make sure you know where you stand before you start shopping for loans. If you see any errors on your credit report, get them fixed as soon as possible. This will help boost your score and make it easier to qualify for loans in the first place.

3. Shop Around for Loans

When you’re looking for “quick loans near me,” you’ll want to compare your options to find the best interest rate possible. This means you’ll need to speak with different lenders.

Get quotes from every lender you’re interested in working with. Once you have the quotes, compare the principal amount and interest rates as well as the repayment terms.

Choose the lender that offers you the best deal. This doesn’t have to be the lender that offers you the lowest interest rate. The best loan is one that has fair terms, the right principal amount, and has a reasonable interest rate.

4. Make Sure You Can Afford the Payments

Before you sign on the dotted line and accept the loan, you need to take a look at your budget. Remember, when you take out a loan, you’re locked into monthly payments until the full balance gets paid off.

Depending on the loan terms, this means you could be making payments for several months or years.

Look at what that monthly payment will be and think about how it will impact your budget. If you can afford it without altering your regular spending habits too dramatically, it’s a good deal. But if you find that the payments would put too much of a strain on your budget, keep shopping around.

5. Don’t Be Afraid to Explore Other Options

Loans aren’t the only way you can get extra money. Sometimes, you just need to think outside the box.

If you’re not looking to borrow a large amount, consider asking your relatives or close friends for help. This way, you won’t have to worry about increasing your total debt and lowering your credit score.

You could also try to take on a side job like dog walking or mowing lawns to make a few extra bucks each week. Remember, the loan will always be there if you need it, but the less debt you take on, the less strain you’ll experience on your finances.

6. Make Sure You Understand the Fees

Unfortunately, almost every loan out there has fees that the borrower has to pay in addition to repaying the principal and any interest accrued on the loan. Make sure you understand what those fees are before you accept the money.

Read through the loan agreement thoroughly and ask your lender to clarify anything you’re unsure of. Also, ask about any hidden fees that you might otherwise not know about.

If the fees, as well as the other terms, seem fair, you’re ready to borrow the money. If not, keep looking and get quotes from a different lender.

7. Be Mindful of Your Total Debt

No matter what you’re borrowing money for, make sure you’re aware of how much debt you’re taking on. Look at your existing credit card debt and loans you’re already paying off. Then consider how that new loan will impact your total debt.

When debt levels get too high, you may find it hard to qualify for new loans, credit cards, or even some apartments. The last thing you want to do is borrow so much that you can’t afford to pay back what you owe.

Do You Need to Get a Loan Now?

Now that you know what to consider before you borrow money from a lender, take a moment and think. Do you really need to get a loan now or would you be better off waiting and saving up your spare change?

The right answer will be different for everyone, but the only way to make a sound financial decision for yourself is to think about it.

Looking for more helpful tips to make getting your finances in order simple? Check out our latest posts.