Applying for a loan can be tricky, here’s what I learned the hard way.
The situation was this: My sister was travelling overseas and needed to sell her car quickly.
Luckily for her, I just happened to be in need of a vehicle.
She was giving me a great price for it, but I didn’t have the money. I needed to get a personal loan.
The clock was ticking, necessitating a quick decision on which loan to apply for, which ultimately led to a few regrets.
So, here are those regrets that I had about applying for my first personal loan.
1. Reconsider your loyalties
All my financial know-how went out the window when it came to my own situation.
When looking for a good personal loan, I prioritised convenience over cost and, doubting my own solid financial history and credit, went straight to my bank.
Its offerings were not the best for me, and the rates were not as competitive as I found elsewhere.
But I was willing to pay for convenience.
I applied and was approved, happy to pay that bit extra so I could keep track of my loan alongside my credit cards and accounts in the one app.
2. Don’t be afraid to consolidate debt
When I applied for my personal loan I also had a manageable amount of credit card debt that I was paying down.
I had considered consolidating it into the personal loan, but when I saw how much I’d have to apply for I panicked and decided against it.
I found myself juggling my loan and card repayments.
While consolidating the debt may have increased the loan amount and my repayments, it would have made those first few months more manageable.
3. Look beyond the loan
The day I received my personal loan was chaotic.
I gave little thought to how I would get the thousands of dollars from my account to my sister’s and my bank didn’t seem to have a process in place.
In the end, I ended up walking 500 metres between my bank and hers, with thousands of dollars hidden in my clothes, praying I wouldn’t get robbed.
Some lenders organise this transfer for you and can send it straight to a nominated account.
4. Use your situation to your advantage
Applying for a personal loan can be terrifying and can make you question your financial worth.
However, if you are in a decent financial situation it’s important to remember that.
If I hadn’t second guessed myself and forgotten my excellent credit score, I would’ve applied for a peer-to-peer loan.
These loans give you a tailored rate based on your credit score and your financial situation and usually offer rates around the 8 per cent per annum mark or less, depending on how good your credit score is and how much you’re looking to borrow.
This is almost half the rate I had to pay for my personal loan from the bank.