4 Questions to ask yourself before applying for an unsecured loan

Last post: Aug 23, 2018

Are you considering making use of an unsecured loan? Here are four important questions to ask yourself before you apply for short-term finance.

When emergency finance needs arise, it's often tempting to head straight for the fastest solution. In many cases, a short term, unsecured loan looks like the swiftest route to accessing the funds you need. Whether you're replacing a totaled vehicle, paying a vet's bill, fixing a broken boiler or ordering school books, covering the cost with an unsecured loan is common practice for many people who require a fast influx of cash to cover an unexpected expense.

Of course, an unsecured loan has its drawbacks. Interest rates will mean that you repay more than your original loan amount, and there are often additional fees to cover. Loans of this type are also not suitable for individuals who do not have the capital to repay within the allotted repayment. However, if you're expecting a paycheck or have carefully budgeted for repayments, they can be a lifeline for those unable to source alternative capital.

In many cases, however, it may be possible for individuals to fund their emergency expenses without needed to use financial products. Finding the fund for these unexpected costs can take a little more time and effort, but you may find that you are able to avoid taking on a loan if you're able to put in some extra work, or make some extra cutbacks. 

So before you apply for an unsecured loan, we recommend asking yourself these five key questions:

  1. Can you delay the purchase?
    If you are expecting a paycheck or are able to budget for the expense (given a little extra time), it's worth finding out whether you can delay the purchase in order to do this. Talk to your seller or service provider and find out whether you can negotiate. You may be able to pay in installments, which could give you time to accrue the funds you need.

  2. Can you cut the costs?
    Perhaps you can buy a second hand replacement vehicle? Maybe your child's school has a pot for subsidising uniforms, school books or school trips? There are lots of ways you can reduce these sorts of expenses, so make sure you exhaust all options before applying for a loan.

  3. Can you use your savings?
    Dipping into your savings often feels like the end of the world, but it's typically much cheaper than covering the cost of a loan.

  4. Can you borrow informally?
    It's not always easy to ask friends and family for a bailout, but if you present them with a clear repayment play and explain exactly why you need the funds, people are often happy to help if they are able - and typically won't charge interest.

If you decide that an unsecured loan is the best option for you, Choice Personal Loans can help. We connect borrowers with the right type of credit for their situation. Contact us for expert advice today