Need some Cash? Home improvements? Debt Consolidation? Whatever your reasons for needing a lump sum of money available to you, likelihood is you will need to speak to a loan company. Now, if you’re going to speak to a loan company, you’ll need to know how to check out that the company will give you everything you need.

This is business

No matter where you get your loan, the lender you use is only lending you the money to make a buck (or many) off of you. While most decent businesses will be honest about the costs (This is a legal requirement), it is not in their interests to tell you where to go to save a few hundred dollars.

Considering this, you should definitely shop around when looking for a personal loan company. While most personal loans do not have a payback term as long as a mortgage, you do not want to be a month into a five-year loan, only to find out the company around the corner is offering the same deal at a better rate.

Is the Company Reputable?

You do not want to deal with a “cowboy” operation that makes huge promises, gives you the money then starts charging all sorts of arrangement and admin costs that have been written into the fine print. Ask yourself:

- How long have they been operating? Yes, just because a company is new doesn’t mean it isn’t reputable (and vice versa), but it’s always worth checking into the company before you take the plunge.

- Do you know anyone that can recommend this company? If someone you know used the personal loan company and had a good experience, chances are you will do well with them too. Many companies are quick to offer testimonials from happy customers, but these will be edited to show the company in the best light possible. You may consider speaking to someone like ASIC (http://www.asic.gov.au/asic/asic.nsf) regarding the company if you have any doubts.

Does the personal loan company do secured or unsecured loans?

- A secured loan is called ‘secured’ as you use collateral that you pledge to give the personal finance company if you don’t pay back the loan. If the money lent is for a mortgage, the collateral is your home. With a car loan, you risk losing your car. With a personal loan, you might pledge something already mentioned, or perhaps another expensive item – Jewellry perhaps.

- An unsecured loan is similar to credit card debt, as there is no collateral to cover the personal finance company’s investment if you do not pay the sum back. This does not mean you will get away with missed payments however; the company will often get you back with late fees and so forth – Plus it can damage your credit rating.

How will your credit standing affect the loan company’s desire to do business with you?

If you have a bad credit rating, or even no credit history at all, some companies will not even humour you. Other companies, however, will be happy to take you on, albeit at a higher than usual interest rate.

-Another possibility is that the company will ask you to have a cosigner on the loan – If you’re young and have poor or non-existent credit history this is likely. What this means is that the company aren’t happy with just your assurance that the loan will be repaid (Which is essentially what your signature is on a loan application). The cosigner will also need to sign the loan documents, ensuring the company that they will pay back the loan if you default on it. Many people will not (or can not) cosign a loan however, as it is a massive financial responsibilty should you default on the loan.

Unfortunately, there are no absolutes when dealing with life, and that includes getting a personal loan. However, if you keep these recommendations in mind, ask any questions you have (no matter how dumb they may seem) and verify every step you take, then getting the money you need should be relatively painless.

Photo by Daniel Y Go