What to Consider Before Applying for a Loan

So you’re thinking about taking out a loan.

Great! Here are a couple of things to keep in mind before applying:

What is the loan for?

The reason for you wanting to take out a loan will impact what type of loan you should apply for. Ask yourself, is it for business or personal use? Should it be secured or unsecured? For example, if you’re looking to cover the costs of a big ticket item such as a new fridge or a VR gaming system for your home, you’d be looking at getting a personal loan. Maybe your business needs to fund new inventory without disrupting your cash flow, if so, you’re looking at a business loan. It’s important to know what you’re looking for so that you know exactly what to apply for. 

Do you qualify?

Next up, you need to ask yourself, do I meet the requirements to qualify for a loan? There are a couple of basic requirements you must meet such as you are 18 plus years old, have a regular source of income, and are an Australian resident or hold the right visa to be able to apply for a loan. If all the points listed above apply to you then congratulations, you are one step closer to finding the loan of your dreams. 

What’s your financial situation?

It’s time to consider your current financial situation. Is borrowing money the right option for you right now? Try mocking up a monthly or yearly budget to make sure that you can afford the loan repayments, interest costs, and any other fees you might incur. This is also a good time to double check where your credit score is sitting. Will your score make you more attractive to lenders or will it get you down in the dumps with some heavy repayments? Use this time to get your finances in order so that you know exactly what you can afford and can easily show lenders where you stand financially.

How long are we talking?

The length of the loan can influence how much the overall loan costs. Luckily, you agree on the loan term with your lender so the ball is in your court. The longer the term, the smaller the repayments, however, you’ll end up paying more in interest fees to cover the whole time period. On the other hand, the shorter the loan, the greater the repayments, but instead with the added bonus of less interest due to a shorter term. Try to determine what repayment amount you’re comfortable paying and go from there. 

Should I look at the interest rate or the comparison rate?

The answer is: both. Although different, both rates are an indication of how much the loan will cost. So, what’s the difference? An interest rate is the amount of interest charged on the balance of the loan per year. Whereas a comparison rate is the true cost of the loan as it takes into account not only the interest fees but other additional charges. Comparison rates are important because although a loan may have the lowest interest rate, it’s not necessarily the cheapest option. Feel free to use our cutting edge artificial intelligence comparison tool to find the best interest and comparison rates available. Remember, the lower the interest rate, the better.

Looks like you’re ready to apply for a loan! Why not leave the nitty and gritty to us and have our AI comparison tool to do all the hard legwork for you. Simply enter in your details and instantly compare hundreds of loan options specialised to your personal needs.

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