5 Considerations When Deciding on Taking a Personal Loan

As far as money matters are concerned, one question endures over time: why is it that some people balk at the idea of borrowing money? Is it because they fear falling deeper into debt? Is it because they’re afraid they won’t be able to keep up with the strict conditions of payment? Or is it because the act of borrowing in itself seems like a desperate and undignified measure? For these reasons or otherwise, the decision to take on a personal loan may make one feel anxious and unsure. But in fact, it’s the opposite that should hold true: applying for a loan should help the borrower feel calm, as if they are in control of their finances, and as if they have been given a blueprint to gradually achieving full financial freedom.

Personal loans are meant to help complete purchasing decisions when cash is short, in much the same way that mortgage and auto loans help pay off houses and cars. The common thread among all these is the mechanism for repayment; these depend on the bank’s available personal instalment loan products, timelines, available payment methods, and interest rates. Applicants need not look at these stipulations as hindrances—rather, they should be thought of as safeguards to the financial well-being of both the borrower and the lender.

Are you now a little more confident about taking a personal loan to supplement your financial resources? What are the things that you should know about beforehand, and what should you expect once your loan has been approved? Here’s a short list of considerations for when you decide on a personal loan.

  1. The reasons driving you to consider a personal loan. Though the freedom is ultimately yours, it is always a good idea to centre your personal loan on fulfilling practical needs in the meantime, such as your education or medical bills. Don’t forget those core reasons; align your spending decisions of the loaned cash with those priorities, instead of superfluous expenses like travel or splurging on a new gadget.
  2. A rough time frame of when you will obtain the funds, and how long the line will be open. A personal loan is a short-term type of solution to your cash woes, but that doesn’t mean that you don’t have to plan for it. Ask your partner bank how long it will take for the loan to be approved, and once it has been approved, agree to a feasible timetable of repayment. It’s not advisable to stretch the loan out for a period of longer than 7 years.
  3. Your credit scores. You can expect your partner bank to look into your credit score, or the documentation of how well you manage your credit, when determining the interest rates of your loan. The healthier your credit—and the more responsible you are about fulfilling payments—the better the interest rates you can expect. The opposite is also true; if your credit rating shows a history of not making payments on time, then the bank might offer you a more expensive deal with higher interest rates.
  4. Your intended means and the frequency of your repayments. Take note of the methods you can utilize for the timely repayment of your loan. Some banks give the option of consolidating loan payment through an existing credit card and can automatically charge a monthly payment from you. This can be a great relief to some, as they can ensure that repayment is fulfilled according to a regular schedule.
  5. The particulars of the loan you’re exploring. No two loan products from the same bank are entirely the same. Knowing that, don’t be afraid to ask your bank questions about their minimum loan amounts, the repayment table that each loan amount follows, and the annualised percentage rate (according to your individual credit records and other relevant information). Don’t forget to go over the fine print of each loan as well; find out if the loan rates differ for preferred customers, if the loan has an insurance policy attached, and what penalties there might be for late payment of the loan. In other words, be careful about any hidden costs and stipulations.

The lesson that you can learn here is that borrowing money can be good for you, as long as you spend wisely and return in a timely manner. If all goes well, then you can truly reap the benefits of a personal loan beyond the extra boost in cash—such as a heightened sense of responsibility over your finances, better impulse control, and pride in accomplishing the financial goals you’ve set for yourself.


  • https://www.creditmarvel.com/blog/10-things-to-consider-before-taking-out-a-personal-loan/
  • https://www.independent.co.uk/money/loans-credit/10-tips-for-taking-out-a-personal-loan-8205679.html
  • https://www.investopedia.com/articles/personal-finance/111715/when-are-personal-loans-good-idea.asp
  • https://www.transunion.hk/education/do-you-know-your-credit-score

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