Life is not always straightforward. Especially when it comes to finances. One minute you’re riding high and the next you’re desperate to find money just to pay the bills. In fact, when it comes to applying for a loan, it could be quite the opposite too.
Things could be going good and you’re looking for a loan to buy a holiday home or add an extension. There are many reasons for taking a personal loan, and there are many things you should know about them in too.
If you’re looking to take out a personal loan, then here are our top tips…
Obviously the main thing to do when taking out a loan is to shop around. It doesn’t matter where you are in the world, there will be a range of loans available, some better suited to you than others. Whether you’re looking to compare personal loans in Canada, the USA or beyond it’s so important to get to grips with what’s on the market.
The APR is of course the main thing to look out for as it tells the true cost of the loan, taking into account interest and other charges.
Do consider the option of early repayment
One thing people regularly do is take out a loan, begin the monthly payments, fall into some more money and keep the payments going at the same rate.
By paying additional money into your loan payments you’ll be able to pay it off earlier and avoid paying surplus interest. The best thing to do with a loan is to pay it off as fast as you can. Get it off the monthly payments you need to make and draw a line under it.
When comparing loans it is worth looking to see if there is a fee for paying it off early, as their often can be however.
Don’t just choose PPI with your lender
While many are mis sold PPI, it can also be a useful thing to have. It can be crippling if you can’t pay your loan repayments back for a legitimate reason such as sickness or unemployment, and PPI can be a real lifesaver.
You don’t have to choose to take PPI with the bank your loan is with though and shopping around can get you a better and cheaper deal. Do read all the terms and conditions for each, and just like searching for a loan, find the one with the terms that suit you.
Consider the amount of your loan
Generally speaking, the bigger the loan, the lower the interest rate and in some cases you may find you’ll pay less by lending slightly more.
Speak to your lender about these opportunities as in some cases lending £7,500 instead of the £7,000 you intended can see your monthly payments drop by a fair amount each month. This is all due to the APR offered and it happens so often that you can get that little bit more and actually save yourself some money.
Don’t go crazy with applying for loans
One of the worst things you can do is make lots of applications for loans. If you’re declined a loan, don’t continue to make further applications as they leave a footprint on your credit score and make you look more of a risk to other lenders.
It’s worth waiting six months or so before re-applying, in the meantime making sure you pay bills on time and do everything you can not to harm your credit score any further. Again, it’s worth doing your research and discovering which companies are fairer at accepting loan applications to boost your chances of receiving one.