1. Why do you need the loan? Do you absolutely need it now or can you wait until you have more cash to pay for it.
2. Do you have other options? Sometimes you can cut expenses, find ways to make extra money, or consolidate debt to save money before taking out an additional loan.
3. What’s the interest rate and have I shopped around? The lower the interest rate, the less you will pay over the life of the loan. That’s money you can save or spend on other things. If you find a lower rate than our credit union is currently offering, please reach out and ask if we can match that rate. Never hurts to ask!
4. What are the payment terms? Click to view our Rates & Terms. We don’t charge pre-payment fees, but late payment fees may apply to some loan types. Click to view our fee schedule.
5. What’s my plan to pay back the loan? Think about your long-term goals. Will borrowing this money help or hurt you in the long run? If it’s a goal that will positively impact your life and reach your financial goals, then you can decide to move forward. If the payments are affordable but still too high to reach other goals, you might take a different route. Either way, try an online Loan Calculator to double check the monthly payments and help you determine what you can afford.
6. How much debt will I have compared to my income? Remember, debt isn’t limited to loans and credit cards from financial institutions. If you have payments on Buy-Now-Pay-Later apps or personal loans to friends or family, include those in your debt calculations, even if they’re not currently accruing interest.
Every person’s situation is unique, but a good rule of thumb is to keep your debt-to-income (DTI) ratio at 35% or less. Typically, a DTI ratio below 36% is needed to get approved for a mortgage, for example, and you’ll want to make sure a loan you take out now doesn’t interfere with other goals that may require another loan in the near future, like buying a home.
Also, consider how changes in your income (e.g., job changes for you or your spouse) might impact your debt-to-income ratio. Having a good emergency savings fund and a plan to continue paying off your debts during unforeseen events is also important.