Things to Consider before Taking out a Personal Loan
When you are in a financial crisis, sometimes it may seem simpler to just take out a loan now, whatever the cost, and deal with any consequences later. However, it’s important to remember that making quick, uninformed financial decisions is probably what caused your initial financial problems. So when you decide to take out a personal loan, especially if your credit score is less-than-favorable, be sure to keep the following things in mind:
1) Do the Math – Regardless of how proficient you are in mathematics, figuring out the overall cost of a loan does not take that long. Be sure that you look into the interest rate, initial fees, late fees, daily fees, etc. This may seem like overkill, but if a company is making it far too easy for you to get money immediately, it’s definitely too good to be true. Think about this. If you are loaned $500.00, with a daily interest rate of 20%, an initial fee of $30, and if you take longer than 2 weeks to pay it back, you accrue 10% of the balance per day as a late fee… by Day 15, you will already owe the company more than double the amount you initially borrowed. Good luck paying that entire amount back if you had to take out a $500 personal loan in the first place.
2) See if your bank can accommodate you – If you have a good relationship with your bank, they are more likely to give you better interest and fee options than your average loan organization. So if you do have this option, try to exercise it before getting into bed with a loan company you are unfamiliar with.
3) Borrow from Friends and Family – Remember that borrowing from loved ones is an extremely risky practice. NEVER do this unless you are positive you will be able to replace the money in a timely fashion. Many people will loan you money with the disclaimer that you can “pay it back whenever you can.” DO NOT take this completely literally. Money can tear apart the strongest relationships. However, if you are responsible in regards to the money a loved one loans you, you can skip out on fees and interest rates. Just never abuse this option, or before you blink you’ll be the black sheep of your family and friends… that is, if they are even speaking to you.