Things to consider when taking out a loan

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Things to consider when taking out a loan

There is no doubt that taking out a loan, such as a payday loan, can be extremely helpful in times of difficulty, getting us out of financial emergencies. However, whilst there are upsides, there can also be downsides too when it comes to taking out a loan. We take a look at some of the things you will need to consider when getting funding to see if it is the right choice for you.

Personal loans are short-term solutions

Personal loans, such as payday loans can be extremely useful if you are struggling financially and need to find money to tide you over on a short-term basis. However, it is important to remember that generally speaking borrowing money over a considerable stretch of time isn’t the best idea financially given the high-interest rates that are standard for personal loans, hence it is well worth making sure that you make more than the minimum repayment on outstanding debt you have on personal loans, as long as you can afford to do so.

 

Personal loans can help you with existing debt

You may be able to get a lower interest rate if you get a loan by being able to consolidate all the debt (credit card balances, student loans, car loans etc) through a personal loan, meaning that you will then only have to pay one bill each month.

 

Remember that there may be more fees to pay

You may also need to take into account various other fees you may need to pay as well as a result of taking out a loan. This is why you should make it a top priority of yours to ask the lender specifically about them so that you are fully aware of the circumstances in which you are taking out a loan, without any other nasty surprises occurring at a later date.

Read the loan documents

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Have you made sure that you have read the terms and conditions of your proposed loan contract? You should always make sure that you do this prior to agreeing to take out a loan with a lender, or else you may end up with a nasty surprise later when it comes to additional fees.

In similarity to the previous point made, you should make sure that you have read all the terms and conditions in the document of any loan you take out prior to signing on the dotted line to ensure that these are the conditions that you agree upon.

 

Shop for the right loan

As with almost any other financial product that you would buy, it is important that you thoroughly research the market prior to deciding on a particular product, in order to make sure that you are definitely getting the very best deal out there.

This doesn’t mean simply looking at the top 5 loans available, make your search is as varied as possible by looking at multiple comparison sites comparing things such as:

  • Loan rates on the market
  • The representative APR that is quoted (this is important as it will include the cost of the loan, additional charges as well as the interest rate)
  • However, it is important to remember that this is an APR quote that not all customers will receive. On average, this rate will be provided to around 51% of borrowers, and it may also be the case that ti is an APR amount that is only for those who ask to borrow a specific amount. This is why you should always opt for the loan that provides the cheapest rate for what you need to borrow.

Loyalty doesn’t always pay

Don’t immediately assume that it is automatically best to get a loan with your existing company. Just because you are already a customer with them it does not mean that you will automatically receive the very best deal that is available on the market such as receiving lower APR, or greater flexibility when it comes to repayments

Check eligibility criteria

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It is a huge error to make by not checking before making an application for a loan whether or not you fit the eligiblity critria for getting one. As it could mean that it could negatively impact on your credit score.

Checking the eligibility criteria before applying for a loan is vital, as you could end up damaging your credit score if you do not check beforehand. Why? This is to do with the fact that when a lender decides to approve or decline your application, they carry out a credit check on you. This leaves a credit search footprint, meaning that other lenders will see it on your file if you make further applications for credit…and are declined, most likely on not meeting the loan company’s criteria. It is a simple mistake that you can make, but definitely not one you should make the habit of repeating.