The Do’s and Don'ts of Getting a Personal Loan

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Whether you need money for business or personal concerns, getting a personal loan is one of the easiest ways to get the necessary funding.

But to make the process efficient and safe for your financial future, it’s essential to be aware of some possible risks and follow a few simple rules. That way, you’ll end up with the money in your account, borrowed on the best terms. Plus, you won’t feel like repaying it is a burden you can’t get rid of.

What Are the Do’s for Getting a Personal Loan?

Use Special Services to Find a Lender

It might take a long time to look for a lender yourself. But with services like GetCash.com, you can fill out a secure application and get connected to a vetted lender within several minutes. After familiarizing yourself with the terms, you can either accept those loan terms or keep looking for another loan. Using such money-borrowing services is totally free of charge, so you don’t miss anything. Plus, you save yourself time and get better loan offers.

Determine the Amount You Need to Borrow When You’re Getting a Personal Loan

Before you apply for a loan, you need to determine your goal and decide on the amount you need to borrow. It might seem better to take more “just in case,” but this is a terrible idea. The more money you borrow, the more you’ll pay out in interest. So make sure to apply specifically for the amount of money you need.

Be Aware of Your Credit Score

Your credit score is one of the most important factors a lender considers when approving or declining your loan application. Besides, your credit score is what determines the interest rate you’ll get if the lender approves the loan. The better the score, the lower the rate. This is because lenders assume that if you paid your loans on time in the past, the chances are high you’ll do so again in the future.

Therefore, before applying for a loan, pull your credit records to understand how good your score is. This will give you some idea about the offers you can expect from lenders. For example, if your credit score is far from perfect, you might want to consider asking a close friend or relative to cosign a loan for you. Or obtain a secured loan.

Check the Terms and Fees Carefully Before Getting a Personal Loan

Before you accept a loan offer, you need to arm yourself with a magnifying glass and read every word of the terms. Otherwise, unexpected fees might surprise you in the future. These are the aspects to pay attention to:

Monthly payments. This is the amount you’ll have to pay every month until you repay the loan completely. Make sure it fits your budget and you 100% can afford it.
Repayment period. This is how long you’ll be making your monthly payments until you have repaid the loan in full.
Interest rate. How high is the rate? Is it fixed? Is it the best offer you can get? Don’t forget to check the interest rate on your credit card as well. If it’s lower than the one in the loan offer, getting a personal loan might not be a wise move.
Secured/unsecured loan. Is any collateral required for the loan? Do you need to provide your bank account?
Prepayment penalty. In some cases, you’ll be charged an additional fee if you decide to pay off your personal loan early.

What Are the Don’ts of Getting a Personal Loan?

Don’t Accept the Very First Personal Loan Offer You Get

Even if the offer looks good, it would still be reasonable to shop around and see what else you can get. This is especially true if you’re applying for a large loan and searching for the lowest interest rate.

However, it might not be the case if your credit score is bad. Then, you’d better catch the offer while it lasts, providing you are okay with the terms and can afford the loan.

Don’t Take the Maximum Loan Amount Available

Even if your lender says you’re eligible for a higher loan amount don’t take the maximum loan amount they offer. Going overboard might be dangerous, as you never know what the future can bring.

It’s always safer to play it low and only borrow the amount you need and can afford. Financial specialists don’t recommend borrowing an amount exceeding 5–10% of your monthly budget. However, every situation is different.

Don’t Make Several Applications at Once

When you apply for a loan with multiple lenders simultaneously, each of them might perform a thorough credit score check. This will influence your credit score and lower your chances of getting the best terms. Even if you are in urgent need of money, be reasonable and cautious.

Don’t Miss Payments

The most important rule of getting a personal loan is to borrow only the amount you can afford and not miss your payments. If it’s possible, schedule automatic withdrawals or at least monthly reminders if you don’t want the money to be withdrawn automatically. Missing the payment will significantly hurt your credit score and lead to more fees and fines.

All in all, a personal loan can be a convenient financial instrument as long as you play by the rules, don’t go overboard, and make your payments on time.

This article was submitted by John Brown.