If you need a loan, it is important that you take the time to review what loan options are available and what one is likely to be of most interest to you. You may find that the best loan is the one that provides you with money at the fastest rate or which one provides you with the most money but this is certainly not the case. There are many things you need to bear in mind when looking for a loan option and the best starting place comes with looking at your own circumstances and requirements.
The first thing you should ask yourself is how much money you actually need. This will go a long way to determining what options you have and what lenders are willing to work with you. If a lender isn’t willing to provide you with the sums you need, you have to rule them out and then look for another option. Of course, it is also vital that you work out how much money you need to borrow and then stick with that amount of money. Just because you can borrow a greater amount of money than you need doesn’t mean that you should take this action. In fact, this could be the worst decision you make in your life.
Too much Credit can be a bad thing
A lot of the problems in the current economy relate to credit being freely available and people taking out too much credit. It is good to have access to money but you have to pay loans back, and a lot of people found that they were paying too much money back. Eventually, this becomes too much of a burden and people found that they couldn’t keep up with repayments. This is always going to be a hardship but it is one that can be avoided by being sensible when taking out a loan. No matter what a lender is willing to provide you with, only take out a sum of money that you need.
You will also have to consider how much money you can afford to pay back every month. This is a difficult process for many people because a lot of people don’t want to wake up to their current financial circumstances. It is vital that you set up a budget but be prepared to be shocked regarding your finances. A lot of people don’t realise how much they spend every month or how much debt they actually have. If you’re looking to stay on top of your finances and improve your current financial situation, you need to be honest about your finances.
Be honest about your Credit Score
Another thing that people need to be honest about is their credit score. A credit score is vital when it comes to determining how much money you will be allowed to borrow by a lender. Traditional lenders are not looking to provide loans to people who have a bad credit score. Other lenders are likely to be more willing to provide funds to these applicants but they are likely to charge more for the process. If you have a bad credit score, it is likely that you’ll end up paying a higher rate of interest to obtain the money you need.
The clearest example of this situation comes with payday loans. Payday loans have preyed on people who suffer from bad credit and who find themselves with no other option when it comes to obtaining credit. While the excesses of these firms have been cut back in recent times, there is still a high rate of APR associated with payday loans. The amount of interest a person has to pay with a payday loan can be crippling so if you can, always avoid payday loans.
An option that is suitable for people with bad credit is a guarantor loan. This style of loan sees you applying alongside someone with good credit who is willing to vouch for you. This sends out a signal to the lender that you can be trusted, and the lending company looks at the credit score and report of the guarantor, not the applicant.
This means that an applicant should find a more affordable rate of interest, which should make it easier to pay the loan back.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.