A person signing a loan contract.

Should You Accept Your Personal Loan Offer

If you are considering taking out a personal loan, you need to think carefully before you sign on the dotted line. This is especially true if you have less than perfect credit. Take a look at some questions that you should ask yourself before you accept that loan.

Important Loan Questions To Ask

Taking out a personal loan is a big decision. Before you make a commitment, ask yourself the following questions.

Can You Afford The Loan Payment?

This should be the very first question that you ask yourself. If you can not afford the loan payment, you should never accept a loan.

Sure, your lender will try to determine whether you can afford a loan, but they only have a snapshot of your finances. Only you really know how much money you need each month to cover your bills. A lender might approve you for financing, even when you can not truly afford the payment.

Before you commit to your loan, fit the payment into your monthly budget. Make sure that you can comfortably afford to make the payment and that things do not become too tight financially. Never just assume that things will work themselves out. They rarely do.

Is There A Better Loan Out There?

You should always consider the possibility that there is a better loan out there. To find out for sure, you need to shop your loan with several lenders. For major purchases, you should compare at least three different offers.

Unfortunately, many people fail to shop their loans, for a variety of reasons.

The first is simple laziness. You may have a loan offer in front of you and are happy with it. Why look any further? The problem is that what you think is a good rate might actually be high and fees that you think are standard could actually be out of the norm. Unless you work in the lending industry, get a few offers so that you can compare.

Another reason people fail to get more than one offer is the fear of multiple inquiries on their credit report. This is an unjustified fear for a couple of reasons. For starters, bureaus know that many people shop their loans, so multiple inquiries will often count as a single one. Additionally, inquiries have a minor effect on your credit score and they stop affecting it in 12 months.

Is The Cost Too High?

Just because you can afford the payment does not mean that the loan is a good deal. You should consider whether the cost of the loan is just too high.

Take a look at the total cost of the loan including all interest charges and loan fees. Compare that to the original loan amount and decide if the cost is too high. If the original loan for 10,000 dollars is going to cost you 20,000 when all is said an done, is that worth it?

Only you can make this decision, but if the loan is for something that is non critical, you should not be willing to accept too high of a loan cost.

Do You Really Need The Loan?

Lastly, do you really need the loan that you are trying to get?

There really is no good loan and unless you absolutely need the money why take on the burden.

Make sure that your loan is for something critical before you commit. Things like home repairs or the purchase of primary transportation, these are critical purchases. Purchases such as recreational vehicles or vacations can wait until you have time to save the money.

Getting A Better Loan Deal

So, what if you really need the money but you are offered a loan that you can not afford or that is too costly? Let’s look at a few ways to improve your loan offer.

Negotiate With Your Lender

That offer you just received might not be written in stone. If it is close to the deal that you are looking for, you might be able to negotiate with your lender. In any case, it never hurts to ask.

Give your lender a call and ask if an interest rate can be lowered or if a loan fee can be removed. Many lenders may be willing to give your loan a second look in order to earn your business.

Clean Up Your Credit

Making big changes to your credit can take months or even years, but you might be able to clean up your credit a bit in the short term.

Pull a copy of your credit file from all three credit bureaus and look for errors. If you find any, write a dispute letter to the bureau and have it investigated. They then have 30 day period to either prove the information correct or fix the error.

If you have a big error on your report, this could get you into a loan with better terms in a little over a month.

Ask For Less Money

The more that you borrow, the riskier the loan is to your lender. Try to scale down your money request and you will likely find that your interest rate and/or fees will decrease. Your payment and the total interest paid will also go down since your loan will be smaller.

Get A Cosigner

Using a cosigner can help you qualify for a better loan deal by essentially piggy backing off of the good credit of another individual. If you have someone with good credit cosign for you, it is very likely that you will get a much better loan offer.

The problem with asking someone to cosign for you is that it is a big imposition. Cosigning is serious business, because if you default, they are on the hook for the debt. Think long and hard before asking someone to cosign a loan for you.

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