The Right Way to Take out a Personal Loan

Written By Mary Beth Eastman
Last updated December 7, 2020

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Loans
September 14, 2018

Simple. Thrifty. Living.

If you’re in need of cash for a large payment or you want to refinance debt, one of the best options for you is a personal loan. Personal loans come in a range of forms, from borrowing from a friend or family member to getting a peer-to-peer loan online.

If you decide to take out a personal loan, you should be aware that there is a right way to do it and a wrong way to do it. The right way to take out a personal loan will ultimately minimize the interest you pay on the loan. This will help preserve your larger financial goals in the long run.

If you want to make sure that you take out a personal loan the right way, there are some steps you can take to make sure you’re getting the best financial deal. Here are some of the most important.

Shop Around for the Best Terms

When it comes to personal loans, they come in all shapes and sizes. Make sure you spend a good amount of time shopping around for best terms. What one lender will charge you may look completely different than what another lender will. Make sure to look at things like origination fees, interest, and whether you can pay the loan off early or not. After considering all your options and reading online loan reviews, make sure you make an informed opinion.

Make All Your Payments on Time

In order to get the deal that you were promised when you took out a personal loan, make sure you make all payments on time. Making all your payments in a timely matter allows you to avoid a raise in your interest rates or paying late fees.

Don't Take Out More Than You Need

Maybe a lender is willing to donate you a large chunk of change–more than you actually need right now. Don’t be tempted to take the cash. You may want to splurge in the short term, but in the long run it could hurt.

At the end of the day, taking out a personal loan is a good way to meet larger life and financial goals. By being careful about how you shop for the loan, select a lender, and go about the process, you can end up with a loan that alleviates financial stress instead of adding to it. If taking out a personal loan makes sense for you, take a look at our review of Lending Club and Prosper.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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