Needing money in your hand at short notice can be stressful, especially when it’s an emergency and you need the money very quickly. Who do you go to? What if friends and family can’t help? Borrowing money under a pressured situation can make it difficult to make the best decision for you and your situation. You need to consider all of your options carefully before jumping feet first into something which may not be right. Here are the main considerations.
How Much Do You Need?
Think carefully about how much money you really need. You should always try to borrow the least amount possible, as this will always work out cheaper in the long run. Remember that anything you get from the lender you will have to pay back with interest on top, so the lesser the borrowing amount, the better for you. Do some sums to work out how much you actually need, then look around for companies offering close to this amount.
How Much Can You Repay?
Whether the loan you want is payable over a month or 5 years, working out how much you can afford to pay back per instalment is very important. Getting behind on your loan payments, even just once, can really affect your credit file and therefore your ability to obtain credit in the future. Look at what you earn and what you spend each month carefully. How much are you left with once all of your essential expenses have been covered? Is this enough to sustain your lifestyle at the moment? Think carefully before committing to payments that you may not be able to comfortably afford.
Do You Have Security?
There are two main types of loans – secured and unsecured. Secured loans mean that you borrow against the value of a belonging such as property or your car. Unsecured means that you borrow money based on your credit score, rather than the value of what you own. If you default on a secured loan, then the lender would have the power to take it from you as ‘payment’ for the loan. Depending on the specific type of loan itself, you may find that it’s cheaper to take out an unsecured loan rather than a secured one or vice versa. Consider what assets you have and which method of borrowing would be cheapest for you in the long term.
What Does Your Credit Score Look Like?
Knowing what your credit rating is can really help you to understand which loan products you could be eligible for and can prevent you from repeatedly being turned down (which can harm your credit score even further). Check your credit file online with one of the credit reference agencies (the three main ones in the UK are Equifax, Callcredit or Experian) by signing up for a free trial or go to Noddle, which is a site run by Callcredit for a completely free credit report. You should get an indicator of whether you’re seen as bad, fair or good by lenders, so use this information to your advantage.
No comments:
Post a Comment