Believe it or not, about 78 percent of American workers live paycheck to paycheck. That means there’s not much money left over to pay for anything beyond their monthly expenses.
If you fall into this category, you know that paying for surprise bills or covering those little luxuries that make life more enjoyable is tough. But it’s not impossible.
A small personal loan can help take some of the strain off your finances. But how do you know you’re ready to speak with a lender?
Here are a few signs that you’re emotionally, financially, and mentally ready to apply for a loan.
1. You’re Ready to Lower Your Debts
More than 38.1 percent of the population has some level of credit card debt. And with interest rates on the rise, that debt will only increase the longer you hold onto it.
Unfortunately, minimum payments aren’t enough to help you pay down what you owe in a timely manner. Instead, they’re designed to get the credit card company more money.
Luckily, personal loans can help you lower your existing debts and save you money in the process.
Most loans offer lower interest rates and more affordable monthly payments, helping you pay down your debt faster. You can use the loan to pay off the full amount or to reduce the amount you owe to any given credit card company.
Keep in mind you’ll still have payments to make, but if you’re ready to get out of debt, a personal loan can help.
2. You Have a Great Credit Score
Having a great credit score is a wonderful way to know if you’re financially ready to take on a small personal loan. High scores mean you routinely pay down your credit card balances, pay your bills on time, and keep your debt to a minimum.
If you already have good financial habits, you’re more than prepared to handle a little debt.
Just make sure you only borrow what you need. Borrowing more than that increases your debt needlessly and raises the monthly payments you’ll have for the life of the loan.
3. There’s a Clear Reason for the Loan
Taking out a personal loan just to have a little extra money on hand isn’t a great idea. In fact, it can hurt your credit score.
Every time you take out a loan, you increase your overall debt. While this is fine if you repay the loan quickly, it’s disastrous if you fail to make those required monthly payments.
Unless you have a clear reason to take out a loan—like paying an unexpected bill or consolidating your existing debt—it’s best to just save your pennies. This will help you stay out of debt and keep your finances in better shape longer.
4. The Paychecks Are Steady
Just because you work full-time and earn a regular paycheck doesn’t mean you can afford everything you need. But it does mean you’re financially ready to take out a personal loan.
With regular paychecks, you’ll have money coming in each month. And that money can help pay down your loans.
Without a regular paycheck, you’ll likely find it tough to make those minimum monthly payments. And the last thing you want to do is have to take out another loan to cover the payments on your first loan. Talk about a downward spiral!
5. You Want to Build a Credit History
Everyone needs some kind of debt in order to grow their credit score. And the newer your credit history is, the lower your credit score will be.
Bad credit scores make it hard to get loans in the first place and can even keep you from getting an apartment, job, or from having the financial stability you deserve.
The only way to grow your credit score is to take out a loan. And there are loans for people with bad or no credit. Read more here to see how these personal loans can help.
6. There’s No One Else Who Can Help You
There’s no shame in asking relatives and loved ones for a little help now and then. But that doesn’t mean they’ll always be able to come through when you need them to.
If you have no one else to help you, a personal loan is a great option. You just have to be willing and ready to make payments on time each month. If you can’t commit to that, you’ll want to consider other options.
Remember, a personal loan should help relieve financial stress, not create it. If taking out a loan feels like it would add to your stress or put a strain on your personal finances, don’t do it.
7. Making Payments to Multiple Lenders is Frustrating
It’s normal to have multiple loans and credit cards with different companies. But as normal as it is, it’s also frustrating. Instead of making a single monthly payment for all of your debt, you’re stuck managing different due dates and sending in separate checks.
Consolidating debt with a personal loan allows you to group together multiple loans and lines of credit to make payments to a single company.
Instead of juggling several due dates, you’ll have a single payment and a single date to remember. This reduces your risk of incurring late fees and helps simplify your bills each month.
Is a Small Personal Loan Right for You?
Ultimately, deciding to take out a small personal loan is a decision only you can make. Think about where you stand with your finances and why you’re considering a loan in the first place.
If you can justify taking on the debt and feel that you’re able to make the monthly payments, apply for a loan. Just make sure to watch your personal finances and take out only what you need.
For more helpful tips, check out our latest posts!