Life’s little (or big) emergencies can strike at any time. Many of us live paycheck to paycheck so when a car breaks down or you have yourself or a member of your family break a bone, many of us don’t have the funds saved up to pay for it so we start to consider taking out a personal loan. Personal loans can be a great option if you need cash fast in order to bail yourself out of an unexpected situation but it is important to ask yourself some questions before getting any loan. Here are 3 questions to ask yourself before taking out a personal loan.
Can You Afford The Monthly Payments?
It is important that you ask yourself if you can actually afford the monthly payments to pay the loan back. Take a little time and do the math to make sure that the repayment structure works for you. It is a very necessary step to take in paying back a loan and learning how to budget your money so you can make the payments on time. The last thing anyone needs to deal with when paying back a personal loan is to deal with collections. Ensuring that you can afford the monthly payments is the number one question to ask before taking out a loan.
Are You Getting The Best Interest Rate?
Another question that needs to enter your mind before taking out a student loan is to examine if you are getting the best interest rate. There are definitely times where we need to take out a personal loan as quickly as the next business day, but if you have a few days to shop around for a personal loan, try to negotiate the best interest rate possible. Remember that lower the interest rate is, more goes to the principal when you make your monthly payment.
What Is Your Credit Score And Is It Correct?
When you take out a personal loan, your credit score will get checked. It is important to know what your credit score is. The higher your credit score is, the more options you will have to shop around for relatively low interest rates on personal loans. It is also very important (but also overlooked by many) to make sure that your credit score is accurate. A study conducted found that as many as 40 million consumers have a mistake on their credit report. Those mistakes can be costly when it comes to interest rates that you are approved for.
So before signing on the dotted line, run through these 3 questions to make sure that taking out a personal loan is the right choice for you.