There are so many loan companies out there and different ways to borrow money, it can be time consuming and a little stressful choosing the correct provider and loan for you. There are some pitfalls and terms and conditions that you should look out for during the process – so we have prepared some top tips to help you make a more educated decision when taking out a personal loan.
Make Sure you Compare Loans
It’s important to compare loans to make sure you are getting the best rates possible. The APR (annual percentage rate) gives you an idea of the true cost of the loan when including the interest payable. Your bank sometimes may say that they offer discounted rates to their existing customer base – but they may not be suitable for people with a poor credit rating. You will find that there are bad credit loan options provided by loan companies, but they may have a higher APR as they may consider you to be high risk.
Don’t Forget to Look at the Small Print
Before you take the time to apply for a loan make sure you read the terms and conditions first to make sure you are eligible. For example – you will find that a lot of supermarket chains who offer personal loans have stipulations that you have a loyalty card with them that has been used in the last 6 months. You don’t want to leave a footprint on your credit rating by applying for a loan you couldn’t actually get.
What are the Repayment Charges?
Although it may not be something you are thinking about now, you may want to pay off your loan early at a later date. You need to check to see if there is a charge associated with this, and what that is. If you think it may be an option that you would like to pay it off early, then this could be a determining factor.
Have you thought about PPI?
Although PPI has received a lot of negative press in recent years, it’s still a product that it useful for people. It means you are covered if you are unable to pay your loan due to being sick or unemployed. If you want this level of protection, shop around for the best rates. It could be that purchasing this straight from your loan provider could cost you much more than from an independent provider.
Consider a Credit Card
Before deciding to go for a loan, you may want to look at credit cards as an alternative option. You can get some good 0% interest offers, which will allow you to delay payment. You can transfer the money into your current account and then try to pay it back on the card before the interest kicks in. This could be an option if you have a good credit rating and aren’t looking to borrow massive amounts.
What is your Credit Rating?
There are some free credit score checkers that will give you a good indication as to what your current score is and how you can improve it. If your credit score is on the low side – you may have to incur higher loan repayment rates. It’s always a good idea to keep an eye on this anyway as standard practice.
Borrow More Money
This might not sound like a good idea on the face of it, but actually – the more money you borrow the lower your interest rates tend to be. This means that you could make a saving by borrowing more money than you originally anticipated.
Don’t Apply for Lots of Loans
In a lot of cases when you apply for an online loan – it will leave a mark on your credit record. Lenders will go through your credit record before offering you money. If you have lots of applications visible on your credit record, it may look like you are having financial problems and therefore not a suitable candidate for a loan.
Educate yourself on the Risks of Secured Loans
Secured loans are loans where you borrow money from the free equity on your house. This is usually for larger sums of cash. They can have low interest rates however it’s important to remember that if you don’t keep up with the repayments there is a possibility that you could actually lose your house. You need to be incredibly confident before going in to this kind of deal.
Hopefully we have given you enough information to make the process a little easier for you, as well as provided you with some alternative options.
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