In an ideal world, we would never have to worry about money but life isn’t always perfect. Unexpected bills drop through the door and the car breaks down two weeks before payday. Yes, life sucks but, fortunately, you don’t have to cry yourself to sleep. Taking out a loan can help tide you over until you get paid or your personal finances hit a winning streak. Here’s how to ensure you make the right decisions.

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Do You Need a Loan?

A loan is a quick and easy solution to money problems, but it isn’t always the right one. If you have cash flow issues, look at alternatives before you apply for a loan.

Can a relative sub you some money to keep you going until you get paid? Will your boss give you an advance on your paycheck? It’s worth asking before making a loan application.

Can You Afford to Borrow Money?

Do not borrow money if you are in a financial hole. Adding further debt into the mix is not a good idea. Lenders expect borrowers to repay their loans and when they fall behind with repayments, they stick a black mark on your credit file.

Before you apply for a loan, draw up a budget to find out how much disposable income you have. Use a loan calculator to work out repayments on different loan products. It will be cheaper to borrow money over a longer term but expect to pay more interest.

Only take out a loan you can afford to repay and only borrow money you actually need. Sure, we would all like a pair of designer shoes or a luxury vacation in Hawaii, but we can live without these things. On the other hand, we probably can’t manage without a car for the daily commute so be sensible about your borrowing needs.

Choose the Right Loan

There is a ton of loan products out there, which makes it hard to select a product that is right for you. Loan comparison sites such as Billig-forbrukslån.no (if you live in Norway) are useful. Alternatively, do some digging on Google and search for a product that fits your needs.

Remember that your credit history will determine what products you are eligible for. The good thing about loan comparison sites is that they can perform a “soft search” to find products you have a good chance of being accepted for. Soft searches don’t show up on your credit history, but they do help filter out lenders who will turn you down if you did apply.

Decide how much money you want to borrow and how long you need to pay the money back. Use the loan APR to compare different loan products and be wary of hidden fees.

Stick to the Schedule

Once you have taken out a loan, make sure you stick to the repayment schedule. Set up automatic payments from your bank account so you don’t accidentally miss a payment.

If you end up struggling to make payments, contact the lender immediately. Most reputable lenders will work with you to find a solution, as it’s in their interests to help.