Ask for loan It is an important financial decision, so it should not be taken lightly. But, Before adopting such a procedure, it is necessary to assess whether this is really the best option.

When we have emergency savings, and these are not always available, debts grow and accumulate. Therefore, there are more and more people looking for a personal loan to be able to pay for those emergencies.

Many times it is large medical bills, medications and credit card debt. The financial area is something that, if not taken care of, can affect the other areas, because it is necessary to make an intelligent decision. So, consider the questions that we will ask you next.

Why do you need the money?

Knowing why you need to borrow in the first place is the most critical indicator you need to pay attention to when thinking about borrowing. Lending money is an important financial decision. And since it can help you, it can also harm you, everything will depend on how you manage the money.

One of the most important loans of your life is to obtain the money for the purchase of your house, where you mortgage it. If you manage to pay a good initial value and it is a home that is within your means, it could mean that asking for a loan is a good option.

But what about personal loans?

According to what was published by Finder, on 47 % the interviewees obtained a personal loan to pay for tickets and/or emergency payments. Borrow money to pay for things like medical bills, a dented car, or a flooded basement.

It is not ideal, so the recommendation is always made to have savings for emergencies. With this, it is estimated that 69% of Americans do not have savings for emergencies that go beyond $ 1,000.

How much can you afford for a loan? (and pay)

Now that you have determined why you need the money and that asking for a loan is in your best financial interest, you'll need to think about how much you can (and do) realistically afford. The word afford is a tricky one.

Just because you can make the monthly payment doesn't mean you can actually afford the loan. In fact, a recent Harvard study showed that nearly 40 million Americans live in a home they can't afford.

The cars are similar. A study by Bankrate showed that most families can no longer afford the average new car. While a AAA study showed that 64 million drivers could not get just $ 500 or $ 600 for a car repair.

The first step here is to ignore the APR on the loan for a moment. That's usually the first thing the loan originator will try to sell you. And rightly so, it's a standard way to compare loans quickly and easily.

Last considerations  

But what's even more critical than the APR is the total cost you'll pay for the loan, sometimes called the TAR (Total Reimbursable Amount). This is the amount you borrow plus the interest you will end up paying over the life of the loan.

A simple way to calculate this is by using a basic loan amortization calculator, like this one from Calculate Stuff.

Also read:

Learn how your credit scores are affected by loans

One personal loan they can be a viable option in a variety of circumstances. First, let's define a personal loan. Some loans are for a specific purchase. You buy a house with a home loan, buy a car with an auto loan, and pay for college with a student loan.

But a personal loan it can be used for almost anything. Some lenders want to know what you will do with the money they lend you, but as long as it was lent for a responsible and legal reason, you can do whatever you want with it.

But what does that mean to you? With a mortgage, your home is the collateral. Similarly, with an auto loan, the car you buy is the collateral. because a personal loan often unsecured, "unsecured", the interest rate will likely be higher. There are also secured loans if you want to reduce your costs.

Here are five circumstances in which a personal loan it could be a good idea.

1. Consolidate credit cards
If you have one or more credit cards that are maxed out, you may be able to get a personal loan to consolidate all charges into one monthly payment. Which makes this scenario even more appealing: The interest rate on the loan could be considerably lower than the annual percentage rates (APRs) on your credit cards.

2. Refinance student loans
Student loan refinancing can provide some financial relief. The interest rate on your student loan can be 6.8% or more, depending on the type of loan you have. But you may be able to get a personal loan with a lower interest rate that allows you to pay off your loans faster.

If you use a personal loan to pay off all or part of a student loan, you'll lose the ability to deduct your interest payments (when you file your income taxes) along with the benefits that come with some loans, like forbearance and deferment AND if your balance is considerable, a personal loan probably won't cover it anyway. Think carefully about all the issues before choosing to refinance your student loans.

3. Finance a purchase
Financing a purchase depends on whether it is a desire or a need. If you're going to take out a loan anyway, getting a personal loan and paying the seller in cash might be a better deal than seller financing. However, never make a financing decision on the spot. Ask the seller for an offer and compare it to what you could get. Then you can decide which is the correct option.

4. Pay for a wedding
Any major event, like a wedding, qualifies if you end up putting all the associated charges on your credit card without being able to pay them off in a month. A loan for a large expense like this could save you a considerable amount in interest charges, as long as it has a lower rate than your credit card.

5. Improve your credit
A personal loan You can help your credit score in three ways. If your credit report shows mostly credit card debt, this may help your "account mix." Having different types of loans is often good for your score.

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The summer before your freshman year in college means choosing classes, checking your future roommate's Instagram, and figuring out how you're going to pay the bills. You will probably need a student loan: 2 out of 3 students are in debt when they leave school, according to the Institute for College Access and Success's 2017 graduation date. But consider a loan after you've accepted grants, scholarships, and work-study. You can get them by submitting the Free Application for Federal Student Aid, or FAFSA.

Here are things to know to get your first student loan.

1. Opt for federal loans over private
There are two main types of student loan: federal and private. Get federal loans first by completing the FAFSA. They're preferable because you don't need a credit history to qualify, and federal loans have income-based repayment plans and forgiveness that private loans don't.

Take a private loan only after you maximize federal aid.

2. Borrow only what you need and can reasonably repay
Undergraduate students can borrow up to $ 12,500 annually and a total of $ 57,500 in federal student loans. Private loan borrowers are limited to the cost of attendance (tuition, fees, room, board, books, transportation, and personal expenses) minus financial aid that you do not have to pay.

3. You will pay fees and interest on the loan.
You will owe more than the amount you borrowed because of the fees and interest on the loan.

All federal loans require you to pay a loan fee, or a percentage of the total loan amount. The current loan rate for student loans direct for university students is 1.062%.

You'll also pay interest that accrues daily on your loan and will be added to the total amount you owe when repayment begins. Federal college student loans currently have a fixed rate of 5,05%, but it changes every year. Private lenders will use your or your co-signer's credit history to determine your rate.

4. Once you accept the loan, your school will take care of the rest.
Your loan will be repaid to the school after you sign a promissory master note agreeing to repay it.

"All money will be sent to and processed through the financial aid office, whether it's a federal or private loan, and will be applied to the student's account," says Joseph Cooper, director of Michigan Technical's Center for Student Financial Services. University in Houghton, Michigan. Students are then refunded any money left over to use for other expenses.

5. You can use the loan money only for certain things
the money of student loan it can be used only for education-related expenses.

"It can't be used to buy a car," says Robert Muhammad, director of the office of scholarships and financial aid at Winston-Salem State University in North Carolina. "It's specifically for educational purposes: books, clothing, anything that is specifically tied to the pursuit of your education."

You can't use your loan for entertainment, takeout, or vacations, but you must use it for transportation, groceries, study abroad costs, personal supplies, or off-campus housing.

6. Find out who your administrator is and when payments start
If you take federal loans, your debt will be turned over to a servicer student loans hired by the federal government to manage loan payments. If you have private loans, your lender may serve as your servicer or similarly transfer you to another company.