Is now a good time to take out a loan?

Deciding whether or not to take out a loan prompts you to consider both your personal financial situation as well as the economic environment at the moment. That’s why there’s no obvious answer to this question, as it depends on the unique circumstances facing every borrower.

Of course, loans often enable borrowers to achieve notable milestones such as home ownership or obtaining a college degree. But if you don’t carefully consider the terms of a loan and assess your current financial situation, you can end up in trouble down the line.

Here’s a look at some of the top factors that you can weigh when deciding if now is a good time to take out a loan:

Top factors to consider

  • Interest rates: 2023 has seen high interest rates, making it harder for consumers to afford loans. Because high interest rates directly impact how much it will cost to borrow, this should be one of the main considerations before taking out a loan. This factor is out of your control, but it’s worth keeping an eye on decisions made by the Federal Reserve regarding interest rate hikes.
  • Credit score: If you have a low credit score, it may be difficult to qualify for a loan. Lenders often check your credit score to determine the likelihood that you’ll be able to meet the terms of a loan. On the other hand, if your credit score is in good standing, you’re in a good position to qualify for a loan with more favorable repayment terms.
  • Annual income: If you can demonstrate to a lender that you have a steady and high enough income relative to the loan you are seeking, you’ll be more likely to qualify and to secure favorable terms. Lenders tend to perceive borrowers without a steady income as riskier.
  • Loan repayment history: Have you taken out loans in the past? Similar to your credit score, your repayment history is another common place for lenders to check to determine your loan eligibility. Lenders will be encouraged if you have a solid track record of paying back previous loans you’ve taken out.

If the economic conditions are favorable, your personal finances are in good standing, and you’re committed to achieving your next milestone investment, then a personal loan is probably right for you.

Westfield Bank offers you a range of options to finance your next big purchase