3 Important Questions to Ask Before Applying for a Loan

Need a little extra money? We understand that sometimes unexpected events, such as paying for new tires or a medical emergency, happen and we may need a  large amount of money to cover these costs. In these moments, a personal loan might be your best option. However, before you apply for a personal loan, assess your situation and consider the type of loan you need. Here are three important questions you should ask before making the decision to apply:

1. What Are the Requirements? Do I Need To Have Collateral?

Loan requirements can vary depending on the lender. Sometimes, they will ask you to secure your loan by requesting some form of collateral, which can be a car, house, or any other asset that can be seized if you fail to repay the loan. Agreeing to provide collateral can help secure a loan, however, it’s important to check all your options. Apply for loans that you are confident you can pay back. 

Keep in mind: Pay special attention to the Annual Percentage Rate (APR), as well as any other type of fees that apply to your loan to any unexpected charges.

2. Can I Afford The Payment Terms?

While getting money through a loan may seem tempting, you need to make sure that the repayment terms fit your current financial situation. Missing loan payments can get you into debt, which can be difficult to get out of. In some cases, you may end up paying more than you initially expected, be charged with additional fees, or may need to take out new loans to pay off the first one.

Keep in mind: The best way to avoid this type of situation is to read the contract thoroughly and be realistic about how much you can afford to pay.

3. Will This Loan Have A Negative Impact On My Credit Score?

If the lender does not send a hard inquiry to the credit bureaus, the loan will not hurt or affect your credit score. Remember that a good credit score can provide you with several financial benefits in the United States so be sure to ask your lender this question before you apply!

By asking these questions, you will be better equipped to not only make the decision to apply for a personal loan, but also choose the best loan for you! Need more financial tips? Visit our Finance section for additional information on loans, credit options, savings and resources for improving your financial situation in the United States.