10 questions to ask yourself before getting a personal loan
Securing a personal loan is like going into a relationship: both require commitment. Besides, there’s trust involved in both borrowing money and going steady. Both you and your financial/romantic partner end up asking questions about whether hooking up will be a good idea. So while we at GoBear can’t help you with your questions about your crush, we can guide you with personal loan matters by recommending you to ask yourself these:
Why get a personal loan when there are other means to borrow money?
...borrowing from your cousin Shaniqua.
Why am I getting a personal loan?
You know that you need money for something, but if that thing is related to your home, car, or business, there are special loan products for those purposes, with lower interest rates to boot. For almost everything else, there’s the personal loan.
How much do I need to borrow?
Better have a feel of what is the right amount to borrow from a bank. Borrowing less than what you actually need plus some allowance could leave you in a tight spot with your personal loan, and banks are reluctant to let you borrow more than what you initially asked for while asking for too much might lessen your chances of securing the loan.
Do I have debt anywhere else?
If you have mortgage, credit card debt, or car loan balance (or maybe even all three), they can affect your chances of being approved for another loan. The personal loan provider would be more worried about lending money to a person with other debt obligations than to a borrower with no bills to settle.
How will I pay down this personal loan?
It would be best to get out your calculator for this one. (Groan, math, I know, but hear me out.) After finding the interest rate for the loan, calculate how much you need to pay in total and per month, then subtract that from the amount of money you’re able to pay each month for the personal loan. If the number is negative, either get an additional raket or opt for a smaller loan.
Do I look gwapo/pretty to these banks?
Beyond your capacity to pay, banks look into the total financial standing of a personal loan borrower to assess whether they will lend you money. The more stable your cash flow is, or the bigger or better maintained your… bank accounts look, the yummier you look to them, while existing debt or bad track record of paying the bills will stand out to them like big, red pimples.
Will I want/need to risk something I own as collateral for the personal loan?
If you really want an unsecured loan, or a loan that involves no collateral, be prepared for higher interest rates that are not that far from those on the quick loans peddled by your local loan shark. But if you have some property you are willing to sacrifice for a lower interest rate or a better chance of personal loan approval, then you might consider a secured loan. However, be aware that the banks, in the process of estimating the value of the collateral asset, will likely appraise your property lower than how much you value it.
Will I be approved for a personal loan in the first place?
You can assess your chances for being approved depending on how you answered some of the questions above. If most of your answers are on the negative side, you may want to reconsider getting a personal loan in the first place. But if you’re pretty confident about your chances because of your financial standing, then it’s just a matter of selecting a bank to get the borrowed money from.
Is this really the bank I want to borrow from?
Honestly, you’ll never be sure, that’s why it pays to research about loan details and requirements, hopefully via GoBear. Just avoid applying to a lot of banks at the same time for the personal loan. That might send a bad signal to the banks, in the same way that a person who courts a lot of other people simultaneously will be frowned upon for his actions.
Do I have all my papers with me?
It’s better to come apply for a personal loan with the bank carrying all the required papers (IDs, income statements, other stuff) than scrambling for it while applying. Not only will being prepared make you look more trustworthy as a borrower, but that will also make the approval process faster. Of course, a suitor who is born ready will look more gwapo to you, right? Same way with personal loan application; banks also want their suitors to be gwapo, too.