Questions to Ask Before Accepting a Loan

When offered a credit agreement online, taking five minutes to review these key questions can prevent financial hardship and ensure the loan genuinely serves your needs.

1. What is the total dollar cost of this loan?

Do not look solely at the monthly payment. Look for the "Total of Payments" line in your Truth in Lending disclosure. How much more are you paying than you originally borrowed?

2. How will this payment fit into my recurring budget?

Examine your upcoming paycheck or monthly cash flow. Will making this scheduled payment still leave enough funds to cover your rent, groceries, medicines, and utility bills? If not, taking the loan may create a deficit that forces further borrowing.

3. Can I pay the loan off early without penalty?

Confirm that the contract allows prepayment without penalties. Repaying early allows you to save on future interest if your financial circumstances improve.

4. What happens if I miss a scheduled payment?

Check the grace period duration, late fees, and returned ACH debit policies. Understanding the financial consequences of a missed due date is essential for managing risk.

5. Have I exhausted low-cost alternatives?

Before signing a high-interest agreement, explore community assistance programs, credit union PALs, or direct payment extensions with your creditors.