Thinking of applying for a personal loan this year?

January can be a depressing month, which is why many people seek new challenges to help them along the way. Many homeowners consider kitchen renovations or home improvements to see their property into the Spring. But after the festive season, this can be a stretch on the pocket. So, to help bridge the gap and provide an instant cash boost, a personal loan may be the solution to some.

When you consider taking out a personal loan, you’ll need to think wisely about it. Wonga says in their blog post that you should ask three questions to yourself, 1. Do you need it? 2. Can you afford it? And 3. How much will it cost you overall? These three questions should stop you in your tracks if your plans are less than sensible or you simply want to splash the cash on a last minute holiday! By working out your finances and figuring out how much you would be spending each month including interest, you’ll be able to see how worth it this loan really is.

So, for example, you want to borrow $10,000 for kitchen renovations. The loan you are looking at has an APR of 3.4% and you want to borrow this money over 5 years. You’ll be paying around $180 a month for 5 years for this kitchen. If this really will improve your lifestyle and the value of your home, this figure could well be worth it! However, it is important to be financially literate, and to discuss all options and explore all avenues, before you commit to any loan.

After you’ve decided that a personal loan is the best thing for you, and you’ve found a product on the market that is a) with a reputable lender and b) has a fair interest rate and repayment schedule that you’re happy with, you’ll need to apply for the loan. Different lenders set up different application processes, but many are now online. This allows you to receive an instant preliminary decision. The decision is based on an initial credit check (so make sure you have a good credit history) and your income or any salary that you have declared. They’ll want to do an affordability check on you, to ensure you won’t be overstretching yourself.

When your lender comes to a final decision, which could be a matter of days, you may need to sign some paperwork and send it back to them if they agree to lending you the money. When they receive this back, it could be a matter of 48 hours before you get the money – some payday lenders are even quicker.

When you receive the money, be sensible with how you spend it. It can feel very tempting to throw it away pretty quickly, but try and plan your expenditure to maximise the opportunity you have.