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5 Points to Consider Before Applying for a Loan

considering loan

From logbook loans to mortgages, if you are thinking about applying for a loan, don’t just rush into it- Take your time to consider if it is the right choice for you.

Can you afford a loan?

It is tempting to get a loan to make up for any shortfalls, whether you are struggling with life’s essentials such as bills or are just thinking about treating yourself. But think about how much can you afford to pay back each month after your usual monthly expenses. Would you also need to give anything up, to make the repayments? 

Write down expenses

Write down of all your monthly expenses- For example; rent/mortgage, utilities such as gas/water, transport costs, and food. Then add the monthly repayments from your potential loan to the list, making sure you can pay it all back, without getting into any financial difficulty.

Only borrow what you need, not want

It is always tempting to apply for that little bit more, but try to stick to what you need rather than any extra that might be available – remember that every extra pound you borrow carries with it an interest rate, which means higher loan repayments.

Protect your credit rating

Avoid applying for various loans at the same time, as some lenders will do a hard credit check which could affect your credit rating and potentially restrict your borrowing further down the line. Being unable to pay back any loan will also affect your credit rating.

Choosing lenders

Choose your lender carefully, are their loans flexible? Will they allow you to end the loan early with no penalty? Do they charge an admin fee? What other fees do they have? What is the APR? Are they a member of any consumer credit trade association? In the UK, make sure they are authorised and regulated by the Financial Conduct Authority.

Knowing all these points will help better protect you and your finances.