If you are not sure of the answer, then you may want to consider some of the side effects that can happen if you end up borrowing more than you can afford. You can do a lot of damage to your credit if you end up taking out more money than you can afford to pay back, so decide carefully before resigning yourself to a loan and payments that could be beyond your reach.
The Associated Fees
Personal loans are often easy to get for most people. They can usually qualify for more than they can safely repay without having to resort to shorting one of their current bills. If you want to figure out what you can afford, look at your current budget. Look at what all of your bills total up to and how much you can safely go without when looking at your current budget. Make sure you include all of the different items you buy regularly, including gas, food, and your utilities. From there you can look at what portion of your income is left over. That portion of your income is what you would have to cover the repayment amount, including all of the associated fees from the loan.
Missed Payments
If you miss a payment of the loan, you could face no only having to pay late fees, but you could also be faced with a higher interest rate. This means that if you maxed out what you could afford with the personal loan you got, you may end up having a payment that’s beyond what your budget can tolerate without having to take from one area to pay for another. You are better off leaving yourself a little room in your budget should the fees associated with your personal loan change at any point in time and require you to make a bigger payment each month.
Credit Utilization Ratio
When you are trying to avoid a negative hit to your credit, then you must be careful of how much of your available lines of credit you have outstanding. If you are taking out a personal loan to lower the amount of outstanding credit lines you have elsewhere, this can end up lowering your total credit utilization, giving you a positive hit to your credit. However, if you end up using your personal loan to pay off other bills, you could end up with a very high amount of your total available credit used, and that can harm your credit.
Your Income – Now and Upcoming
When trying to figure out how much loan you can afford, you need to look at your current income first. This will help you see how much of a payment your current budget can handle, assuming your income level does not go down any. If you happen to be one of the lucky individuals who have raises calculated ahead of time, you can then include any dedicated raises that will be happening during the time that the loan is outstanding. This will allow you to add a bit more money to your payment and pay your personal loan off sooner.
If you are planning to take out a personal loan, you need to know your maximum amount you can safely take out. Do not go over the amount you can pay off with your current budgetary restraints. You could end up in a worse spot than you are now if you do not carefully plan out your loan’s repayment schedule or if you take out too large of a loan.
Unlike payday loan agencies, at Spotloan you are able to pay us back over months, not weeks. Take as long as 10 months or pay us sooner and save on interest, it's up to you!
