Make sure you can answer these questions:

  • What is it going to cost you?
  • Can you afford it?
  • What repayments will you need to make?
  • What interest or fees will you have to pay?
  • What will happen if you miss a repayment or if you can’t pay the loan back?
  • How long will it take you to pay off the loan?

Shop around

When choosing a loan make sure you do your research and shop around. Lenders must make their interest rates, fees and terms publicly available to help you compare loans and make a decision about which one is right for you.

When you are borrowing money to buy something, remember you don’t have to borrow from the same person who is selling the goods. For example if you are buying a car you don’t have to take out the loan at that car dealership, you could take out the loan from a bank, credit union or other type of lender.

Generally the higher the annual interest rate the more expensive the loan will be. But you also need to take into account the types of fees the lender charges. Make sure you compare establishment and administration fees.

Your lender’s obligations

Your lender must meet a set of ‘lender responsibilities’, this means they must act carefully and responsibly at all times, treat you reasonably and with respect. When signing up for a loan this means lenders must:

  • ask questions to make sure you can afford the loan
  • ask questions to make sure the loan is suitable for you
  • help you understand the key terms of the loan before you sign up
  • ensure the loan is not oppressive and they don’t treat you oppressively.

You will need to provide your lender with information proving that you can afford to repay the loan while still covering your expenses. Collect together the information you need and be ready to answer your lender’s questions. Think about what might happen if something unexpected comes up – will you still be able to pay back the loan?

Lenders must give you key information about the loan including annual interest rates, fees and the total amount you will pay over the life of the loan, before you sign the contract.

Make sure you think about the information your lender gives you before you sign up. You can ask your lender to clarify, take more time to think about it, shop around or get some independent advice.

Read more about signing up to a loan PDF (958 KB)