Before you take a personal loan

Work out the real cost, compare at least three offers and spot the scams before you sign.

21 items · 5 sections · money, personal-finance, fraud

Do you need it? (3)

Write down exactly what the money is for and how much you need
Could savings, a payment plan or a cheaper option cover it?
Struggling with existing debt? Get free debt advice firstA new loan can make it worse. US: nfcc.org. UK: citizensadvice.org.uk. India: your bank's grievance desk or RBI's cms.rbi.org.in.

Compare by APR, not by the interest rate or the monthly paymentAPR includes most fees, so it is the fairer number.
Check the total you will repayExample: 5,000 at 15% APR costs about 173 a month and 1,240 interest over 3 years, or about 119 a month and 2,140 interest over 5.
Pick the shortest term you can truly affordLower payments over a longer term usually cost more overall.
Add your new payment to your budget and check it still works in a bad month

Include your own bank and a credit union or co-operative bank
Use pre-qualification or a soft check where you can, as hard checks can affect your score
Ask about origination or processing fees
Ask about the late-payment charge
Ask about the charge for paying off early
Ask whether the rate is fixed or can change
Turn down add-on insurance you did not ask forIt often gets added quietly and raises the cost.

Never pay a fee up front to get a loan approvedThis is the classic loan scam.
Be wary of guaranteed approval or no credit checkSerious lenders check whether you can repay.
Do not give an app access to your contacts or photosThis is a known tactic of illegal loan apps.
In India, confirm the lender is registered with RBICheck it, or report one, on the RBI Sachet portal.Open