There will come a time where couples will find themselves needing that financial boost to take care of their expenses. Taking out a joint personal loan can be the solution, but there are a few things that need to be discussed before taking out a loan. Here are 6 things to discuss before taking out a personal loan.
1. Have you checked your credit score?
Applying for a joint personal loan can increase your chances of getting a loan that comes with a low interest rate, especially if you both have a good credit score. It is important to check your credit score before you apply for a loan. According to an Experian survey, 71% of people never checked their credit score before, 32% didn’t know how to and 24% don’t know what a credit score is. Your credit score will prove your creditworthiness, and the higher the score the better. Credit score according to ranking is:
- 579 and below: Poor
- 580-669: Fair
- 670-739: Good
- 740-799: Very good
- 800+: Exceptional
2. What you plan on using it for
It is vital to assess your reason for taking out a personal loan. If it's something that you both can afford to save towards, you will be better off not taking out a personal loan. However, once you have discussed your reasons why you need a personal loan it will give you a clear direction of how much you need to adequately cover expenses. It can also help you narrow down your search on finding a loan that comes with suitable features.
3. Will you be able to afford a personal loan?
The Australian Bureau of Statistics found that Aussies took out $5, 777 million worth of personal loans to take care of various expenses in October 2018. One common mistake that people make is to take out a personal loan without checking if they will be able to meet the repayments on it. It is vital to check if the loan comes with an interest rate and a loan term in which you will be able to comfortably pay off without defaulting on it.
4. Can you cover the ongoing costs and fees?
There is more to a loan than the low interest rate, which is why you need to check the fine print. Most loans come with ongoing fees and charges that can affect your monthly repayments. Make sure to check if there any penalty fees that come with making an early repayment. It is better to not take out a loan that you have not checked for such expenses which can wreak havoc on your budget later on.
5. Have you compared your options?
Settling for the first loan that appears to have the best rate can cost you in the long run. Comparing loan from various lenders can help you find a loan that comes with the best rate that is suitable for your needs. You may also find a lender who will be able to give you an increased amount, which is why it pays to compare.
6. Have you spoken to a financial advisor?
Speaking to a financial advisor can put you in a good position to know what options are out there and which will be best suited for you. It can also help you avoid making a costly mistake.