This is a good question, why take out a loan, put yourself in debt, have monthly payments, if you don’t have to.

This can be broken down to two main reasons:

* You need a loan as you do not have the money on hand or yourself

* You’re smart with using “other people’s money”

From these two (2) reasons on making a decision regarding taking out a loan, you need to ask yourself some further questions:

* What the loan is for, what are you purchasing, do you need to make this purchase now?

* Can I save up for the purchase?

* Can I make a less costly purchase that I may have the money for now?

* What type of loan do I need?

* Affordability, can I afford the loan payments, and can I show I can afford the loan payments?

* Timing, is this the best time to take out a loan?

* Where should I go for the loan?

* What are the consequences if something happens that I cannot repay the loan?

What is it you are going to use the loan for, what are you using the loan for, what are you going to buy?

Loans can be to make a purchase, or to invest in the future, invest such as in an education, going to university, or maybe starting a business of your own.

In many instances, the answer to this question will answer some other questions, such as what type of loan do I need, and possibly where to go for the loan.

If you are needing a loan for university, then a student loan is what your loan needs dictate.

A loan to buy a car, then car financing, either a car loan, or some form of financing such as HP/Hire Purchase or PCP/Personal Contract Purchase.

If you are buying a property, then a mortgage loan is usually what is called for.

Then in asking yourself what is the loan going to be for, do you need to make the purchase now?

Once again, the type of loan you require helps in answering this question, as if you wish to go to university and need student loans, then the time frame for the loan is being dictated as well. You want to begin university in September with your mates, then you need the loan immediately, or soon.

A mortgage loan is similar.

You buy a property, and you need a mortgage loan, rather quickly, if you wish to setting the sale.

If you need to purchase a car, possibly for wok, then once again, you are going to require the financing in the every near future.

Personal loans are a bit different in that when asking yourself what is the loan for, and do I need to make the purchase now, the answer could go either way.

If the personal loan is to replace an appliance, such as a fridge, then you may need the loan immediately.

If the loan is for something like a car repair, once again you need the loan quickly.

Loans for other purchases can perhaps wait, which leads us to our next question.

Here is where what you are looking to buy can dictate as to if you can save the money and not require a loan.

The cost of what you are going to buy, such as a property, or a car, or some other large purchase, makes it difficult to save the money; it can take a long time.

And things such as emergency repairs or even a holiday, could possibly be saved for, if you have a savings plan in place; especially for emergencies.

This and the answer to our next question, can have a strong bearing on if you should take out a loan or not, or use savings and look at a less expensive purchase.

Can I Make a Less Expensive Purchase?

Making a less expensive purchase may be a way, not to just save money, but you may be able to use savings, or save up for the purchase, or use a blend of savings and a loan.

An example may be in buying a car.

Finding a less expensive car to buy, and using what money you have to either pay cash for the car, or use what money you have saved for a deposit, and the deposit may help you purchase the more expensive vehicle as you will need a smaller loan.

When it comes to emergencies and repairs, shopping around can save you money, but sometimes the cost or expense, is what it is.

As previously mentioned:

* Property: mortgage loan

* Cars or other vehicles: car financing

* Education: Usually student loans, which are available through the government, however, some courses or to gain other qualifications and training, can be financed with personal loans.

* Other purchases: personal loans

* Starting a business: personal loans, business loans, cash advances, lines of credit, invoice financing, asset financing

Affordability

This is a big question to ask yourself, as the lender will base their loan decision on a few factors, and affordability is one major factor.

You need to look at your budget and see if you can afford the additional expense each month, and also be able to show/prove you can afford the payments.

Putting together an income and expenditure sheet, outlining all your income and expenses, and also if need be, showing documentation for those expenses and income.

Timing

This is a simple but can be a difficult question to answer.

It is not the timing of when you need the loan, such as buying a property and requiring a mortgage very quickly. This is the timing of the market, when is it best to look for a loan.

When the “credit crunch” hit a few years back, needing a business loan was not easy to get. It was bad timing.

If banks and lenders are experiencing losses, they may very well tighten-up their lending belts.

There are those that feel we are siting on a debt time bomb, and want lenders to look closely at borrowers for affordability and other issues.

The type of loan, and the timing of the loan, can be important.

Where Should I go to Get a Loan?

Many borrowers use their banks, who they have been banking with as the first port of call to get a loan, and this may not be the best idea, or deal for them.

There are many online lenders and credit brokers, who may offer better interest rates and terms.

As a borrower if you have bad credit, or a low credit score, this will dictate you to look for and consider bad credit loans, and brokers that work with bad credit lenders.

Once again, student loans can be obtained through the government.

Many lenders will offer many different types of loans, car loans, personal loans, business loans, etc. These can be a good place to look depending on what type of loan you need.

Applying for and taking out a loan is a responsibility.

A responsibility to both you as a borrower, and also to the lender.

As a borrower you are expected to be truthful when applying for a loan, and also repay the loan. However, there can come times when life gets in the way, and making payments may be a financial struggle. So you need to be aware of what may occur.

Obviously the lender is going to expect and want their monthly payments, and if you miss them or do into default, they are going to want to know why?

Lenders do understand these matters, however, they also have tool in place to collect a loan.

A lender can simply send notices and phone calls to try and set-up a new repayment plan, to take further action in the form of CCJ’s/County Court Judgments, to even the use of Bailiffs.

For secured loans, lenders can also consider repossession of the secured item.

No one enters into a loan agreement with the intention of not repaying the loan, but things and life can happen.

As a borrower you do have options as well if you are struggling with bills and debts, everything from debt management plans, IVAs, to bankruptcy. Many lenders even have in-house debt management plans to work with their customers.

While it may seem like a lot of questions to ask oneself before getting a loan, as you can see, the questions can fall into place, and get answered very quickly once you decide what you need a loan for, and the time frame for the loan.