Turn on any TV or open any newspaper, and before long you’ll be faced with an advertisement for a personal loan. With so many loan products and providers on the market, each catering to a different demographic, it’s important to consider several factors before deciding on which loan is right for your circumstances.
When deciding on how much you’d like to borrow, it’s important to apply only for the amount you really need. Remember, a personal loan is not free money and as tempting as it may be to borrow just a little bit extra over and above what you actually require, you will have to pay it back with interest, so ask yourself if a little extra now is it really worth it in the long term?
You also need to be aware of exactly how much the loan is going to cost you every month and whether or not you can afford it. If you are applying online then many providers have handy loan calculators on their sites that will give you an idea of your repayment amount.
Once you have an idea of what your loan is going to cost you each month then you should sit down and work out all of your incomings and outgoings to make absolutely certain it’s going to be affordable. It can be easy to forget about certain items when making this decision; for example, you may have monthly credit card payments or need to budget for things such as road tax and car repairs.
Next, check for repayment penalties listed in the small print. Some providers will charge you a fee if you want to pay off the loan earlier than the term you initially agreed. You should also make sure you see the total amount repayable figure so that you’re aware from the outset just how much interest you are due to pay back on the original amount you chose to borrow.
This may seem an obvious point but it’s important to read all loan documentation you receive throughout the duration of your agreement. Your lender may have made changes to your agreement or interest rate and chosen to inform you in writing so it’s worthwhile reading through everything connected with your loan. If you’re unsure of what the changes mean to you then give them a call and have someone explain it to you.
Finally, when you’ve gone through all of these points and have decided to apply for your loan, make sure you only do it once. Applying for lots of different loans with various companies can adversely affect your credit rating even if you never take them up. People sometimes do this unwittingly and decide to go with whoever deals with their application the quickest without realising this could be harming them in the long term.
Whether you’re applying for a bank loan or a loan from an alternative loan provider, such as a broker, the same steps apply. By making sure you understand the loan product you are applying for, you can help increase your chances of success in being approved for your loan by eliminating those products that may not be suitable.
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