Loan

Things to Keep in Mind When Taking Out a Loan

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Borrowing money is an important financial move that can do more harm than good if not done right. There are financial consequences that can wreak more havoc on your credit score if you don’t plan well. Before you take out a loan and any type of loan for that matter, there are things to keep in mind. Below are some things you can start with:

Borrow only what you need

When you borrow money, it is sometimes tempting to borrow more especially when you’re eligible to do so. But that can be a mistake you don’t want to commit. A wiser move you should rather do is to keep the borrowing within your needs. Then it will be easier to repay the loan as planned.

Make sure you can afford the monthly repayments

Another key thing to remember is to make sure you can handle the monthly repayments. This is why borrowing beyond your means is a big no-no for responsible borrowers. You don’t want to put yourself in a hotspot. If you can’t afford the repayments, chances are high you’ll end up in even bigger trouble in the end with hefty penalties and skyrocketing interest rates.

Shop around and compare deals

Don’t sign up for the first cheap deal you find. In order to find the best deal available, take your time by shopping around from different providers and lending firms. Then compare similar deals. Look at their representative APRs and base your decision on the potential cost of the loan. Obviously, you should go for the deal with the cheapest interest rate available. Only then will you be able to insure that you’re getting the best end of the deal.

Find out more about hidden fees, penalties and other charges

Don’t stop with comparing APRs when choosing your loan deal. Go the extra mile by allotting some time to find out more about hidden fees. Lenders can be tricky and before you knew it, your loan’s cost may have already spiked up because of hidden fees. To avoid that from happening, do the proactive approach by calling your lender and ask about hidden fees, early repayment fees and other related charges. Your goal is to know all the details so you won’t get the shock of a lifetime once the repaying starts.

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Loan, Uncategorized

Loans: What You Need to Know

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If you’re not careful and if you’re a novice at borrowing money, loans can be a pain in the neck. They come in many forms and types that it can be confusing to choose one that is right for your needs. But don’t panic. Getting the right loan may not be easy but we’re here to help. We’ve created this quick guide to loans to tell you everything you need to know about the financial product.

Two major categories of loans

There are two major categories of loans. Most loan types fall into these two categories. There are the secured loans which are loans that require collateral or security and there are unsecured loans which doesn’t need any collateral.

Secured loans are harder to get approved for because of the collateral requirement. But the upside, you can borrow more money with secured loans. Examples of secured loans include mortgage, which is secured on your home, car loans secured on your vehicle and logbook loans.

Unsecured loans, on one hand, are more accessible and easier to get approved for. But the loan amounts are significantly less than what a secured loan may offer you. Unsecured loans are usually ideal for quick cash personal needs like car repair, overdue bill, etc. Examples of unsecured loans include payday loans, doorstep loans, credit cards, guarantor loans and most types of personal loans.

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Places to get loans in the UK

If you’re in the UK and you’re of legal age, you can avail a loan from different place. If you have a good credit score, for instance, you can go directly to your bank and apply for a personal loan. There are also internet loan providers. Rather than go to high-street banks and building societies, you can go online and look for trusted provider to apply for a loan. Borrowers with bad credit will usually find a suitable loan online.

Cost of loans

When you’re looking for a loan, one of the key concepts you’ll stumble upon is APR. It stands for annual percentage rate, the financial concept used by providers to advertise their loan products. It basically represents your loan’s cost inclusive of fees and related charges in a year. Take for example logbook loans. Providers offering this type of loan advertise their deals with a representative APR of 400% on average. That gives borrowers an idea how much the loan may cost in a year. That also means that if you want to find the cheaper deal, you should go looking for one with the lowest APR.

The Credit Score Factor

Interest rates vary from one loan type to another. Secured loans with long repayment terms usually come with lower interest rates while high risk loans such as logbook loans come with high interest rates. Another factor that may affect your loan’s cost is your credit score. If you have a good credit score, you’ll be able to get the best rates available. If you have a poor credit score, on one hand, your loan may be more expensive because of the higher interest rates.

Consumer Credit Act

If you were going to take out a loan, it would help to know about the Consumer Credit Act. The act offers protection for borrowers. It requires lenders to disclose full details in written form about the true interest rate of your loan. It also gives the borrower a period called the “cooling-off” period giving you time to think about going for or cancelling the loan agreement.