What is a personal loan? This is where you borrow a fixed amount of money and then pay it back within a set period. The amount you borrow has interest charged on it. Personal loans, otherwise called unsecured loans because you don’t need any security to get approval.
Due to the unfriendly economic situation in the UK and almost all world countries, many businesses and individuals have to borrow to survive, run businesses or acquire an asset/ property.
Statistics show that consumer lending, loans, and advances in the UK were worth over 21 billion British pounds by September 2020.
Before you apply for that personal loan, it’s pertinent that you get all the relevant information. That will improve your chances of approval and help you secure the loan facility at a lower interest rate.
Before applying for a personal loan, consider the following;
A good credit history
A credit score represents your creditworthiness based on your credit repayment history. It’s also called the CIBL score. It ranges from 300-900, and any score above 750 is considered ideal. A lower credit score shows poor credit management, and that could result in a rejection of your application or a high-interest rate.
To maintain a good credit score, you have to pay your loans and cards in time. You can avoid delayed payments by using automated payments. You can also consolidate your credit cards to one- that will make it easy to manage the repayments, and thus your score is not messed.
Most importantly, never exceed 30% of credit utilization.
Don’t jump into the first lender you meet without checking on others. Different lenders offer different rates, and therefore you’ve to compare terms and conditions. There are various platforms you can check out on the offerings of different financial institutions.
That will enable you to get a personal loan at the lowest interest rates.
Check for all costs
Interest rate is not the only cost you incur when repaying a loan. There are other costs like the processing fees and late payment fee that you must take into account.
Before you consider applying for a personal loan through a particular lender, find out the various charges they have to get an estimate of the total cost. That will help you in managing your finances properly and decide whether the loan is affordable.
Consider your needs first.
Before you approach that lender, you have to get a list of your needs and prioritize them. The primary purpose of personal loans is to buy a car, pay for a medical emergency, or any other expense. Based on the estimated expenses, you should be able to decide on an appropriate amount.
Do not over-borrow just because the lender is ready to approve a higher amount. You may strain when repaying, something that will affect your credit score, becoming a stumbling block when you need credit in the future.
When taking a personal loan, you have to be careful to read the terms and conditions carefully. Some rogue lenders bury charges and costs in paperwork. Work only with lenders who are clear in their offering. Most importantly, take a personal loan that you can pay back comfortably even when things don’t work out as expected.