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A personal loan can come in handy for many things such as paying off a range of unexpected expenses or goals that you may have in mind. However, if you are wondering if a personal loan is suitable for you, or if you will be able to make comfortable repayments here are five signs to help you.
1. You have saved up money
Being able to stay on top of your loan repayments is a key indicator of whether you are ready for a personal loan or not. The last thing you need is to take something that will create a debt spiral for you. Keep in mind that a personal loan is something that you will have to repay back. Therefore, having money saved up can help reduce the amount that you will borrow. It can also be a defining indicator of whether you will really need a personal loan or you could save towards your goal.
2. You have researched your options
You already have an end goal in mind; whether it is to purchase a car, handle renovations, or handle unexpected medical expenses it is vital to do your research. Comparing your personal loan options along with the features that come with it can help you know if the loan is suitable for you. Check the fees, interest rate, ongoing charges, and repayment terms to see if it will be flexible with your finances.
3. You are willing to put in the work
Finding the right fit for your needs means that you need to carefully consider your options instead of settling for the first option that appears to be good. You can speak to a financial advisor or broker who will be able to assist you in finding something that can work best for you. However, it is vital that you out in the work by reading the terms of a contract and calculating the cost of the loan over the loan term. Remember to check if you will be able to make more than the minimum repayment on the loan. This can help you to quickly reduce the amount that you owe.
4. Will your budget be able to handle it?
Research by the Australian Centre for Financial studies revealed that 1.1 million Australians had 3 to 5 loans a year. A sure way to find yourself drowning with a loan that you are not able to pay off is not checking your budget. Before you take out a loan consider if you have space in your budget to handle the added expense of having a loan. You may also have to consider reducing the amount you want to borrow. You may have to avoid a loan altogether if you already have a tight budget.
5. Have you checked your why?
A personal loan has a diverse range of uses, but carefully consider the reasons as to why you are taking one out. Weigh whether you really need the loan, or would be better off sticking it through and saving money for it.
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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.
The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.
Approval for personal loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.
The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.
