When it comes to personal finance, there are many forms of credit that people have access to these days. This includes credit cards, mortgages, store cards, secured loans, and personal loans amongst others. The loans market can be something of a minefield if you are unfamiliar with it. This is why you need to put plenty of thought into the loan that you take out.
If you are taking out a loan for the very first time, you should make sure you do your research. So that you will find the most suitable one. In this article, I will provide a how to handle your first loan guide and what you should do.
Tips on finding the most suitable loan
When it comes to finding the most suitable loan for your needs, you need to ensure you take a number of different factors into consideration. This will help to ensure that you get the right loan for your needs. There are many different factors that you have to consider ranging from your credit score through to interest rates.
One thing to remember is that there are many different loan companies out there offering a wide range of loan products. However, by choosing the wrong lender or loan, you could end up paying over the odds for your borrowing. This is why you need to ensure you put plenty of thought into choosing the right lender for your loan. Some of the considerations you need to take into account include:
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The rate of interest charged:
It is important to look at the rate of interest for the personal loan you are considering. Interest rates can vary from one lender to another. The actual rate that you are charged will also depend on your personal and financial status. The higher the rate of interest, the more you will pay for your borrowing. Therefore try to find a low rate loan that suits your budget.
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Minimum and maximum borrowing levels:
Another thing to look at is the minimum and maximum amount that you can borrow. Again, these can vary from one lender to another. It will also be dependent upon your income, financial status, and credit score. You should make sure that the lender is able to offer the amount that you need before you make your application to save wasting time. Also risking being rejected, which can have a negative impact on your credit.
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Eligibility requirements:
Different lenders have different eligibility requirements when it comes to loans. As a result this is something else that you will need to look into. For instance, some may require you to be on a minimum income while other may require an excellent credit score. Make sure you take the time to look at the eligibility requirements before you make your application. Tthis will save you time and inconvenience.
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Repayment terms:
It is important to check the repayment terms and periods, as these can vary between different lenders. You need to ensure that you are able to get the repayment term that suits you. Bear in mind that the longer the repayment term, the less you will pay each month. However, this also means you will pay more in interest for your loan. If you choose a shorter repayment period, you will pay out less each month but you will be able to clear the loan more quickly and pay less in interest on your borrowing.
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The reputation of the lender:
You also need to look at the lender in addition to the loan itself. You should ensure that you choose a lender that is reputable and governed by a relevant industry body. It is also a good idea to look at reviews of the lender. You can then have a better idea when it comes to service levels and reputation, which means greater peace of mind for you.
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Any fees and charges:
Another thing to look at is any fees or charges that may be imposed by the lender over and above the interest charged on the loan. For instance, some lenders may charge an administration fees. While others may charge you if you repay the loan earlier than the specified repayment period. Making yourself aware of these additional charges and fees will make it easier for you to make a more informed decision with regards to the loan and lender that you choose.
Another thing you should do before you make any loan application is to request a copy of your credit report so that you can check your rating. This will make it easier for you to determine which lenders you should apply to. And this will be based on their eligibility requirements. If you have a low credit score, you will generally have to find a lender that offers loans to those with damaged credit. However, if your credit score is good you should have a far wider choice of lenders that you can select from.
Getting value on your loan
By taking the above points into consideration, you can get far better value for money on your loan. It also means that you can find a lender that is reputable and governed by an industry body, which is important. One thing you should always do before you make your application is go through your income and outgoings thoroughly, as you need to ensure that you can comfortably afford the repayments on the loan without impacting on your household budget for essentials.
Once you know how much you need to borrow, you can use online calculators to work out what the repayments will be. You can then determine whether this is viable for you based on your budget. Make sure you avoid overstretching yourself, as otherwise you could end up missing payments and making late payments, which will have a negative effect on your credit.
