Applying for a Personal Loan: The Dos & Don’ts

So, you’ve got big dreams, but your bank account is looking a little lackluster. Don’t sweat it! That’s where personal loans swoop in like a superhero to save the day. But before you dive headfirst into the world of borrowing, let’s talk about the dos and don’ts of applying for a personal loan.

The Do’s

Do Dream Big:

A personal loan can give you the financial boost to get where you always wanted to be. That money can help you start your own business, buy a car, or finally go on that dream vacation. Sometimes loans can seem like a scary source of financial strain, but loans can help you fulfil your dreams if you’re a responsible borrower.

Do Have a Spending Plan:

Before you sign on the dotted line, you need to have a detailed answer to this question: How am I going to use this money? It’s not enough to say you’ll use the loan to kickstart your business. That’s too vague and it may mean that the money runs out before you can achieve your goals. Instead, you should know exactly how you’ll allocate the money. For example, you may need to allocate 20% of the loan to purchase equipment, 30% to hire staff, and 50% to rent a location.

Do Build Good Credit:

You may not be thinking of applying for that loan right now, but building good credit will help you when you do apply. If you have good credit, that means you have a responsible financial history: you have a track record of making on-time payments on credit cards, loans, and bills. The better your credit, the more likely you are to receive favourable loan terms and lower interest rates.

 The Don’ts

Don’t Skip the Fine Print:

Don’t let the boring language and legalese scare you off. You need to understand ALL the terms and conditions of your loan, including the interest rate, repayment schedule, fees, and penalties for late payment or non-payment. And remember, if anything is unclear, ask questions until you’re satisfied. A responsible lender will always want to ensure you’re comfortable before you commit.

Don’t Apply for the Easiest Loan:

You may have all your money in one bank. Or you may see a lender promising fast approvals and easy money. But those loans may not be the best deals for you. Don’t settle for the first offer that comes your way. Compare interest rates, terms, and fees from multiple lenders to find the best deal that fits your needs and your budget.

Don’t Ignore your Budget:

Maybe you wanted to get a loan for $25,000. But woah! It turns out that you qualify for a loan of up to $50,000! Think of what you could do with all that money. At a time like this, resist the urge to overborrow. Remember, you’ll have to pay back every penny… with interest. It’s crucial to crunch the numbers and make sure you can comfortably afford the monthly payments before you commit. Your future self will thank you!

And now for one last Do. Do know that you’re not alone. If you want someone to give you your own personal Dos & Don’ts list, you can always reach out to a financial advisor. And remember, if you’re a smart borrower, personal loans can help to make your dreams your reality.