If taking out a bank loan is something you are considering doing in the next few months, there are some things you should consider before you apply for one.
After all, there are some circumstances where taking out a bank loan is a smart thing to do and some circumstances where it is not.
Would you benefit from a loan consolidation? — If you have various credit card balances and other small loans, it could benefit you to consolidate them altogether into one loan.
In that case, taking out a bank loan can be a smart thing to do. That is, as long as the interest you are offered means your repayments on the consolidation loan will be less than if you pay each debt separately.
Do you have a good credit rating? — Another reason to take out a bank loan is if the loan you can get will come with a low interest rate.
As this is usually based on the how good your credit rating is, make sure the bank loan will come with a low interest rate before you accept it. Otherwise, you could end up having the same high repayments every month.
Is your spending under control? — Most people get into debt by not controlling their spending habits. If you plan on taking out a bank loan in order to pay off debts, be absolutely sure you have your spending habits under control before you do.
If not, you could quickly find yourself with a new bank loan that is difficult to pay off, and becomes even more difficult as you keep spending.
Is your debt manageable? — While it can be very beneficial to take out a bank loan so you can repay debts you owe, if the debt you owe is too large, there really is not much point doing so.
Be sure the debt you already have is manageable before you take out a bank loan.
If, however, you feel repaying the bank loan could be a problem, now is not the time to apply for one. Instead, look at hiring a financial adviser to help you get your debts and your spending under control first.
Is your repayment plan solid? — Make sure you are honest with yourself about the possibility of paying off your debts with the plan you currently have in effect and use a calculator to make sure you know what to pay (i.e. kreditrechner).
Is that repayment plan solid, and will it allow you to repay all your debts easily? If not, do not fool yourself that taking out a bank loan will solve your debt problems. Especially as, in many cases, taking out such a loan will probably just make them even worse.
