You don’t want to wish you had made a different choice.
Key Point
- A personal loan can be taken at an affordable price for a purchase.
- In some cases, taking out a personal loan is a wise choice.
- If you can’t make your loan payments, have a long repayment period, or fluctuate interest rates, you may regret taking out a personal loan.
If you need to pay for something, but don’t have the money to buy it in advance, a personal loan is for you.
Interest rates for personal loans are usually lower than standard credit card rates, resulting in lower loan fees. And because you borrow a fixed amount and have a fixed repayment period, you don’t have to worry about facing uncertainty about the total amount of your loan or when it will be repaid.
However, despite all the benefits of personal loans, there are times when you may regret taking one. To assess how likely this undesirable result is, consider the following key questions:
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Is it easy to pay monthly payments?
The biggest issue in determining whether your personal loan will be a choice you regret will have to do with how comfortably the payments fit into your budget.
Making a large payment may leave you unable to afford other necessities in the future – at least not borrow more. And I don’t want to feel like I have nothing left to use for other things.
Deplor the choice of borrowing when the payment is easily affordable and you can save for the future, cover the basics and spend on a little fun while still being able to factor it into your budget less likely to become
How long will it take to pay off a personal loan?
When you take out a personal loan, you are using future income to pay for things you buy today.
If you’re doing this in a short amount of time, this may not be a big deal. But if you have long-term personal loans that you’re still paying off in five or ten years, you may find yourself wishing your future self hadn’t committed to those ongoing payments. I can’t.
Is the product you are buying really worth it?
The interest you’ll be paying on your personal loan will make it more expensive.
You should also consider how long you can enjoy the item (or experience) you purchase. If you buy something that you can enjoy for a few weeks or months, but pay for it for a few years, you may regret your decision to rent.
Could interest costs increase over time?
Finally, you need to know the loan details and whether the payments can change over time or remain stable. If you choose a variable rate loan and the interest rate may go up, you may regret taking it if the interest rate goes up and the cost of the loan goes up.
Thinking about these four big questions can help you make an informed choice about whether taking out a personal loan is a good financial move or a decision you wish you hadn’t.
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