What to Consider When Applying for a Personal Loan
If you’re in need of funds and considering applying for a personal loan but don’t know where to start, then this post on ‘key takeaways’ is essential reading for you.
Why would I get a personal loan?
There are many different reasons to apply for personal loans:
- Interest rates on personal loans are often lower than interest rates on credit cards.
- The amount available to borrow with a personal loan is often more flexible.
- It’s a quick and convenient way to borrow money.
Further reading: ‘Smart Reasons To Get A Personal Loan’.
As with any sort of borrowing, eventually you’ll have to repay the total amount borrowed, with the addition of any disclosed fees, at an agreed interest rate. Most loans are serviced with repayment plans i.e. when you pay a certain amount back to the lender on a weekly, fortnightly or monthly basis, over an agreed loan term.
With the right household budgeting and support from a responsible lender, you can easily manage your loan repayments alongside your existing living costs, and benefit from the upfront cash you receive from a personal loan.
Before you decide to apply for a personal loan
Anyone looking for a personal loan should consider these three questions first:
- How much do I need to borrow?
- What is my ideal repayment schedule (weekly, fortnightly, monthly)?
- What can I afford to comfortably repay as a regular instalment?
Once you know how much you need to borrow and at what rate/frequency you can afford to pay back there are three more things you’ll want to consider:
- Interest rates
- Loan provider/support if things go wrong
These factors will help determine the total amount of your loan, your loan repayment amounts, the repayment frequency, the maximum term of your loan, and what level of customer service and support you’re likely to receive throughout the entire loan process.
Interest accrues over time. The less time taken to repay a loan, the less interest paid. Don’t over-borrow. Borrow what you know you need and only when there is no other way of taking time to save for your needs. Whatever your repayments are set at, try to pay more. This will reduce the time taken to complete the loan and reduce the interest and cost incurred.
Work out exactly what your loan repayments will be, including interest and any administration fees, and make sure you can work this into your household budget over the total loan term.
Further reading: ‘Top Financial Tools to Save You Money’.
Choosing the right loan provider will make all the difference when it comes to managing a personal loan. A trustworthy lender with a strong commitment to responsible lending will make the process as simple and stress-free as possible, and ensure they understand your financial situation. A responsible lender should also work with you to establish a household budget to avoid any potential financial hardship you may face with loan repayments.
The true value of a trustworthy and responsible loan provider surfaces from their customer service. For example, if something unexpected occurs during the repayment period and you have to miss a payment – a responsible lender will help you through the issues rather than immediately demanding late repayment penalties.
Shop around for a provider that takes pride in being a responsible lender. Talk to a team member about your financial situation and whether applying for a personal loan is the best option for you. Ensure you fully understand the total amount payable, and avoid being influenced by speed of transaction and non-disclosure of contractual responsibilities.
Further reading: ‘How to Choose the Right Personal Loan Provider for You’.
Instant Finance offers personal loans from $200 up to $20,000. We’ve been helping kiwis service personal loans for over 47 years and have a strong commitment to responsible lending.
If you have any questions about our personal loans, or would like to talk with one of our friendly staff, then give us a call on 0800 760 000.