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In a perfect world, we’d all have enough money to meet our needs. In reality, there will likely be a time when borrowing money is your best option to get ahead in life. When this happens, it’s important to know what you’re doing.

Tried and tested, here are our top five rules to follow before taking out a loan. 

1. Check your credit score

Ever applied for a credit card, mortgage or other loan? Then you’ve got a credit history. This can be accessed by lenders and can determine the loan term and rate offered to you. You can check your credit file here.

To stay on top of your credit score, it’s important to give accurate answers on your credit application forms, pay your bills on time, and if you run into financial trouble, get in touch with your creditors straight away. 

2. Research the types of loans

The more you know, the better decision you’ll make. In Australia, there are two main types of loans to think about: secured and unsecured. For both, you’ll also have to choose between a fixed rate or variable rate.  A secured loan means you’ll have to put up a guarantee (like your car), while an unsecured loan doesn’t require a guarantee – but it will come with a higher interest rate. 

Before making a decision, make sure you do a thorough loan comparison and check that you meet all the right requirements.

3. Don’t borrow more money than you can repay

Sure, it might be the boat of your dreams, but if you can’t afford the repayments – don’t borrow the money. It’s that simple. Instead, do your calculations and figure what you can afford. Who knows, a smaller boat might be what you’re looking for after all.  

4. Read the fine print

Whether you’re taking out a personal loan for something special, or a car loan to get you on the road, take care understanding what you’re committing to. A loan is a significant responsibility, so it’s best to be prepared. Among other things, you need to wrap your head around:

The interest rate and term length
Any fees payable
How much your repayments will be
How often you’ll make repayments
What payment methods are available

5. Have a contingency plan

Sometimes life throws us curveballs. While we don’t like thinking about it, illnesses and accidents can strike down the best of us. And if you can’t earn an income, keeping on top of loan repayments and other expenses can get tricky. That’s why it’s important to consider protecting your income with life and income insurance.

On the right path

If you can live by these five simple rules, then taking out a loan could be a great option for you. But like with all big commitments, it’s important to think ahead, understand your choices, and if you need it, get expert advice.
 

Ready to apply for a personal loan? Apply online and we’ll get back in touch to get you approved.

The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs. You should obtain and consider the Product Disclosure Statement or terms and conditions relating to the products mentioned, before deciding whether to acquire any products.

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