Is a Personal Loan a Good Idea?

Over the last two years, many Americans have taken out personal loans to cover some of their expenses. TransUnion reported that the outstanding balances of unsecured personal loans have increased by nearly 59 percent, from $146 billion to $232 billion. It’s no surprise that taking out a personal loan can be a helpful financial tool in difficult economic times, but before making that decision, carefully evaluate your finances and the purpose for the loan.

Is a personal loan a good idea - Clark County Credit Union in Las Vegas, NV

Here are some helpful tips to make an informed decision about whether a personal loan is the right option for you.  

Assess your financial situation

Before applying for a personal loan, you need to first evaluate your finances and ability to repay the loan. Determine how much money you need to borrow (be realistic with the amount) and have a rough estimate of how much you can afford to pay back monthly.

Use a budget calculator to help you create a realistic picture of your expenses and income in order to determine your needs versus wants.

List your debts

Taking out a personal loan is another form of debt. When you apply for a personal loan, the lender will want to see a debt-to-income ratio of 43 percent or below. Before you even sit down with a lender, it’s best to make a list of the debts you’re paying already and compare them to your income before you get into another loan. 

Compare lenders

By comparing different lenders, you can evaluate their approved loan amount, interest rate, repayment terms and the required fees. This comparison allows you to choose a lender that will provide you with the most favorable terms, potentially helping you save money in the long run. 

Never miss monthly payments

Like with any other type of loan, if you do take out a personal loan always make timely payments since it can help you improve and maintain a good credit score. This also demonstrates that you are a responsible borrower, making it easier for you to qualify for future loans or refinance at better interest rates. 

At CCCU, we will work with you every step of the way to make sure that a personal loan is the best fit for your financial needs. If you have any questions about personal loans, visit www.CCCULV.org or call us at 702-228-2228.