Applying for your first loan can be more than a little intimidating, but we all have to start somewhere. If you’ve made the decision to take out your first personal loan, you’re probably discovering just how much preparation and uncertainty you must reckon with before applying.
Without previous loans in your credit history, lenders will have less to go on. That means that your first loan application is an important step, one that will lay a foundation for future borrowing and help set you up for financial independence. Here’s what you need to keep in mind as you apply for your first loan.
Knowing why you need the money
This may sound like a no-brainer but laying out specifically what you intend to use the money for is a very important step. This helps you determine exactly how much you need and plan your loan accordingly. Why is this important? Ideally, an itemised list of the specific expenses you’re borrowing money for can help reduce overborrowing and save you on potential interest. It can also save you coming up short and finding yourself in a more financially difficult situation than you intended. Also, a responsible lender is required to make sure the loan they are providing meets your purposes.
Calculating what you can afford
Once you know what you need, it is time to determine what you can manage given your current financial situation. What is your household income? Will that income remain steady throughout your repayment term? Work out your average monthly expenses as well to determine how much in payments you can afford to make on a weekly, fortnightly, or monthly basis. Remember, if you can’t afford your payments, you can’t afford your loan.
Requesting your credit score
Even though you haven’t yet taken out your first loan, that doesn’t mean you don’t have a credit history. Wherever you apply for a loan NZ wide, your lender will check your credit report to determine your creditworthiness or how likely you are to repay your loan. You may not have previous loans in your credit report, but you may with your other credit contracts, from credit cards, overdrafts, utility or telco payments.
You can request this information about yourself from each of the three agencies that process NZ credit scores: Centrix, Equifax, and Illion. You may like to request and view your credit report prior to applying for your loan, so that you can better anticipate what rates and terms you’re likely to receive, and make sure the information is correct.
Understanding your loan terms
Let’s face it, loan terms and interest rates can seem complicated. Whether you’re applying for an online loan or sitting down with a lender in person, you shouldn’t feel like your loan terms are a mystery when you sign. Work with a lender who can help you through the terms of your loan. You’ll want to work out how much you’ll have paid in total when you’ve finished your repayment, what fees may be payable under the contract, and when your payments will be due.
A good lender wants your loan to help you. They want to see you succeed. The first step is to help you understand the ins and outs of your loan.
Make your first loan a great experience
A personal loan is an investment in your financial future. Don’t let your first experience be a negative one. Nectar is one of New Zealand’s most trusted names in online loans, with a 7-minute application process and, if approved, we aim to have the money in your account the same day. With flexible terms and competitive rates, apply for a loan at Nectar today to make your first loan the right one.
*Nectar’s lending criteria and responsible lending checks apply.