Regardless of the reason for wanting a personal loan – perhaps you are looking to clear some outstanding debt or want to purchase something with a high price tag, you need to be careful as not all loans are created equally. Loans are big business and many companies out there are just looking for ways to get as much money from you as possible, its also important to consider how are these loans affecting your credit. In the following post we will look at some great tips to help ensure that your loan application is successful and that you get the best deal possible.
Don’t Just Go For The First Loan You Come Across
As with buying anything, particularly online, you need to shop around when looking for a personal loan. Make sure you compare the APR or annual percentage rate, as this tells you the real cost of the loan and includes the payable interest, other charges involved and when the payments will need to be paid.
Although a bank you currently have accounts or other products with may say that they will offer you competitive and preferential rates because you are already a customer, you may still find a better deal elsewhere.
Always Read The Small Print Carefully
Always read the small print carefully before signing anything to ensure if you are eligible for the loan. Some of the best offers come with tricky conditions. For example, there might be a personal loan from a bank that has a great rate, but in order to benefit from that rate, you need to have a special loyalty card and have been using it within a designated period of time. Whereas other banks offer the best rates to customers who already have a current account with them.
Check If There Are Charges For Early Repayment
Although it may not seem like you are going to do this when you first take your personal loan out, you may feel more motivated towards paying it off early once you get your budgeting into order. However you need to be careful because some loan companies will charge you if you if you pay it off earlier than you have arranged to.
Run A Check On Your Credit Score
If you are looking to apply for one of the best personal loans on the market, you need to make sure your credit score is healthy. Lenders, in general, only have to offer the typical/advertised APRs to 75% of loan applicants. This means if you have a poor credit score/rating, you may not be eligible for the better deal and may be offered a higher interest than you thought.
Borrow More Money
One sure-fire way to lower the interest rate of a personal loan is to borrow more money. Generally speaking, the more money you want to borrow, the lower the interest rate will be. As a result of how some lenders price loans, there are certain circumstances where borrowing more money could mean you save money in the long run.
Avoid Applying For Too Many Different Loans
When applying for a loan online, you leave behind what could be described as a footprint on your credit history, that all lenders can see when they decide whether to approve your application or not. If you have a lot of applications on your credit history, it can make you look financially unstable or desperate. This means that loan companies are likely to see you as being a credit risk and therefore, you are less likely to have your loan application approved.
Understand The Potential Risks Of Secured Loans
Comparitvely so, unsecured loans are more expensive than secured loans. However, as a secured loan involves your house (or something similar) being used as collateral (a promise that you will keep up with loan repayments, and if not, they can take your house), there is a serious risk that you might lose your house if you can’t keep up with the payments. Even if you have no intention of falling behind in your payments, you still need to factor this in as a possibility.
Never sign up for a loan therefore, unless you are completely sure you can repay it in the time frame the lender has decided.
Give Consideration to Peer-To-Peer Lending
Are you a bit funny about banks since the credit crunch and recession? If so, you might want to look at peer-to-peer lenders. These sites, like Zopa for instance, aim to put borrowers and lenders into contact with one another. It’s worth noting though that as applications are decided upon based on your credit score, if you have a poor credit history.
If Possible, Avoid Payday loans
Payday loans can be very tempting indeed, particularly if you are looking for a quick payout. However, although they seem like they are giving you the chance to borrow the money you need until you are paid, they normally have an extremely high interest rate. This often means that you are likely to pay a lot more than what you borrowed, for a loan that you only have until the end of the month, fortnight or week.
Take Note Of The Loan Term
One part of the loan you should pay close attention to is how much time has been given to you to pay it back. It’s worth noting that although a loan with a longer term may seem like a good idea, because you have more time to pay it back, it actually means the loan will be more expensive as you will be paying the interest for a longer amount of time.
Opt For A Fixed Interest Rate
It’s normally recommended that you opt for a loan that offers you a fixed interest rate for the money you borrow. This basically means that the interest rate and therefore the amount you need to pay will stay the same for the entire term of your loan.
It gives you real peace of mind, knowing there is no chance that the repayments required will rise, allowing you to budget for your loan more easily.