Community Posts ~ Allen Brown


3 Questions to Ask Before Considering a Personal Loan

Posted on April 8, 2022 by Allen Brown

When an expense comes up, whether or not it is expected, you have a few options to pay for it, and one of those is a personal loan. An advantage of taking out a loan is that the terms can be better than putting it on a credit card and knowing you won’t be able to pay it off by the end of the month.

You might get better interest rates on a loan than your credit card. Still, if you are considering taking one out, you should know how it works before applying.

What are Your Other Options?

Consider what your other options are before jumping into taking out a personal loan. If you need the money now and the emergency fund won’t cover it, you may not have many options. However, if you have at least a little time to save, like if you are planning a move, you may have more options. One option is to drastically cut your monthly expenses, at least temporarily. That way, you can put everything you can toward the large purchase so you don’t have to borrow as much. You might not have thought about how you can take advantage of a refinance for student loans, but you may be surprised at how much you can save each month, especially since options like NaviRefi student loan refinancing let you decide exactly how much you are able to pay each month. Refinancing gives you a new loan, so you’ll have new terms and a new rate, which might just let you reduce your monthly spending enough.

How Much Should You Borrow?

You will let the lender know how much you want to take out with your personal loan. Just because you get approved for a certain amount does not mean you must or even should take that amount out. Taking out only the amount you need is a great way to manage your finances and can help you save money on interest rates. Don’t be tempted to take out too much just to get an extra cushion. Before signing anything, make sure you look over the interest rate, terms, and life of your loan. See if there are other fees associated with this so you can figure out the true cost of borrowing the money. Consider whether you can get this into your regular budget and if you can pay it back over time.

What Type of Inquiry is the Lender Doing?

The lender will run a check on your credit score to decide how much to approve you for. They may do a hard inquiry or a soft one. If it’s soft, only you will be able to see it, and other lenders will not see it. That does not affect your credit score. However, a hard inquiry can affect your credit report and everyone will see it. It is usually best to only have a soft inquiry made since it will not affect your credit if you do not get approved for the loan. You might want to get a free credit report ahead of time to see where you stand.


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