Before running a marathon, an athlete checks their fitness level and trains to make sure that they are ready for the pressures of the race. In many ways, a loan is a commitment like a marathon. It takes time and dedication to come out ahead financially. To make sure you are ready for a loan, you should consult this financial fitness checklist before signing any loan contract:

• Is your credit report an accurate reflection of your finances? Identity theft and mistakes can dramatically affect your credit score – and the interest rates you are offered – so you may want to get a recent copy of your credit report to make sure it gives the best possible picture of you to possible lenders.
• How many loans and debts do you have? If you have many debts and loans – and especially if many of your debts are unsecured – you do not make the best candidate for a loan.
• How secure is your work position? No one can predict the future, but if your work situation is unstable, getting a loan you may not be able to pay off can lead to financial disaster.
• Are you ready for financial emergencies? You should have an emergency plan in case of illness or loss of work. How will you be able to make your monthly bill payments? What savings or assets can you draw in case of an emergency?
• Do you have alternatives to a loan? It is a bad idea to get a loan just to generate income. Consider renting part of your home, seeking investment opportunities, or getting part-time work in your spare time. Even if you choose to take a loan instead of following these possibilities, having these possibilities ready in case of emergency is a handy way to ensure that you will be able to make debt payments – even if life throws you a curve ball. Are you saving and investing each month? If you are not, you are in poor financial shape and should not consider a loan. Even if you only save a dollar day or $30 a month to invest, you need to do this to build your financial muscles. Saving and investing is a good way to protect yourself against the future and a good way to practice responsibility with money. If you are living pay check to pay check, you should avoid getting a loan.
• Do you understand how money works? There are plenty of good books at your local library that can explain investments, loans, and money to you and can help make money seem less intimidating and mysterious. The more you know about money the more you can make it work for you. If you understand money and loans, you are also less likely to make costly mistakes with debt.
• Do you live above your means? If you are getting loans to pay off a lifestyle you cannot afford, you may be headed for financial disaster.

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