Thinking of taking out a personal loan? Don’t rush in!

The beginning of the year is a great time to review your finances and come up with a plan that will ensure that your finances look a lot healthier by the end of the year. There are many simple changes that you can make to your everyday spending that will save you lots of money. From reducing your energy bills to switching your bank account, there are a lot of options for you to look into.

Consolidating your debts can be a good way to reduce your outgoings. If you can get a loan that charges less interest and covers all of your current debts, then you might be better off if you consolidate your debts into one loan. Before signing up for any loan you should always read the small print and make sure you know exactly what you are signing up for.

If you are thinking about applying for a personal loan, there are a number of things that you should be wary of. It can be easy to panic and rush into signing up for a personal loan without doing due diligence.

Is this the only option?

Before you look at taking out a loan, make sure that this is definitely the only option. If you have money saved somewhere then you are better to use that as you are unlikely to be getting anywhere near the interest on your savings as you will be getting charged for your loan. Read more articles like this to help you to decide whether a personal loan is a good idea.

Taking out a loan can lead to great financial difficulty if you discover that you can’t afford it once you have taken it out. Through carefully working out your monthly budget and being very realistic about it, you should be able to determine whether the loan is affordable for you.

personal loan

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Interest charges and Non-payment charges

The worse thing you can do is get yourself into further debt with more interest charges and non-payment charges. You could even end up getting CCJs against your name, which will prevent you from getting a mortgage or any type of loan for up to 6 years. Make sure that you only borrow the amount that you really need, even if the company offers you more than that amount.

Compare interest rates

Shop around and compare the interest rates that are available. There are many different companies that offer personal loans and you might be able to get discounted rates if you have other products with them. Ask your mortgage provider and/or current account provider whether they have any special offers on loans and then check them against the best rates in the market.

Finally, think about the worst case scenario. Unfortunately problems arise in life and if you don’t get sick pay and fall ill or you lose your job, how would you be able to pay back your loan? It might never happen but if it does, you will seriously regret taking out a loan that you can’t afford to pay off.


Arnel Ariate is the webmaster of Money Soldiers.

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