We all face situations when we think about taking out a personal loan. It could be that you need some extra cash for home decorating or work on your car. Maybe you need to fix a broken boiler or pay for a short course of study.
The good news is that there are so many loan options available that there is bound to be one which suits you. However, it’s advisable to think long and hard before opting for a loan and here are five things to consider.
1. Types of loans
Loans can broadly be placed into two categories; secured and unsecured. With the former you need to provide some form of collateral. Interest rates tend to be on the lower side and repayment terms are flexible.
With the latter, you don’t need to provide the lender with any collateral. Interest rates tend to be higher and repayment terms shorter. However, the convenience for the borrower can vastly outweigh these terms. You can even get unsecured loans for people with bad credit from some specialist lenders.
2. Shop around
Deciding on a loan is the same as deciding on anything else that you will pay for, so shop around. The main point to keep your eye on is the APR (annual percentage rate) as this provides the full picture of what a loan really costs you.
3. Early repayment
Some lenders will impose a fee if you opt to pay off your loan early as a sort of penalty for their loss of future interest. Look into this before you sign on the dotted line because you may find that you are willing and able to make repayments earlier during the term of your loan.
4. Budget wisely
Only take out a loan for the amount that you truly need. This may seem obvious but when the option of extra money is on offer it’s sometimes tempting to borrow that little bit more.
5. Apply carefully
Don’t apply for too many loans online as you leave a cyber footprint everywhere you have been! Lenders can access this and it may make you look as though you’re in desperate financial difficulties even if you aren’t and influence their lending decision.