5 things to do before you apply for a personal loan

If you're after something special, like a new car, an overseas holiday or a home reno but you don't have the cash saved up to pay for it, a personal loan can come in handy.

But, like any big financial decision, you don't want to rush it. Here are five things you may want to do before you apply for a personal loan to get your financial ducks in a row.

Figure out how much you need to borrow

Before you apply for a personal loan, at the very least you'll want to know exactly how much you want to borrow.

The amount you want to borrow can impact the kind of personal loan you apply for. You can generally borrow more if you opt for a secured loan (i.e. you offer an asset of value, like a car or boat, as security against the loan).

At SocietyOne, you can borrow between $5,000 and $70,000 if you opt for a secured loan, or $5,000 and $50,000 if you opt for an unsecured loan.

Check your credit score

Once you know how much you want to borrow, you'll want to check your credit score. Your credit score gives lenders a snapshot of your financial history, like how many credit cards or loans you've had or applied for, and whether you've made consistent, timely repayments.

If your credit score is lower, lenders consider you to be a higher risk. This means you may be denied a personal loan, or only eligible for a personal loan with a higher interest rate.

So, prior to applying for a personal loan, do your due diligence on yourself. How are your finances looking? If your score isn't looking as healthy as it could be, you may want to consider taking steps to improve it. It could be consolidating your debts, slowing down on the finance applications or simply checking your report for any errors (they can happen!).

 Start comparing lenders - and interest rates

So you've ticked the above off your to-do list. Now, it's time to figure out which lender you're going to go with.

Don't limit yourself to the traditional banks! Use comparison sites to help you find the best lender for you. That means checking out:

• Who can offer you the best interest rate
• Who can offer you the repayment schedule you need 
• What terms and conditions work best for you.

SocietyOne offers personalised interest rates, so each borrower will be offered a different interest rate depending on their credit history, credit score, employment status and loan amount.

Check the eligibility criteria

Once you've found a lender that suits your needs, you'll want to double check that you meet their eligibility criteria.

At SocietyOne, that's things like:

• You need to be at least 21 years of age
• You must be an Australian citizen or a permanent resident of Australia
• You must earn more than $30,000 per annum (with Centrelink considered to be a supplementary form of income)
• You must have a good credit score.

But other lenders may have different criteria - so read the fine print!

Plan your repayments

Ever heard the saying 'don't bite off more than you can chew'? Well, the same goes for loans. You'll want to make sure that whatever loan you opt for, it works for your budget.

You can use the SocietyOne personal loan repayment calculator to work out your repayments, or your chosen lender can walk you through the repayments and the repayment schedule.

But remember: it's up to you to work your new loan into your household budget.