Expert Tips On Taking Out A Loan
Considerations when taking out a loan
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Loans come in many shapes, sizes and forms, but there are still many general tips that apply to the process. It’s not a decision to be taken lightly, and if you find yourself unable to meet payments, you’ll be in big trouble.
Rates have typically been falling this past couple of years, which means loans are more popular than ever before. Some can be paid off quickly, while others can not, but either way, you must be sure before you take the plunge!
So, here’s our expert advice on all things loans - have a read through and see if you missed anything.
Tip 1: Read the fine print In your loan documentation
Look, be honest - nobody does this. Whether it’s your mobile phone contract or the warranty information on a dishwasher, we all skip the fine print.
With something as tricky as a loan, I wouldn’t even dream of it. Some loans appear too good to be true at face value, with any caveats hidden in tiny writing. Found a personal loan with a rate of 5 percent? Great! Well, not so great, as it turns out you need to be a customer with that bank.
You could be caught upfront like this, or you could be caught mid-loan too. What if you get charged for early repayments? This information wasn’t anywhere to be found - except it was, in the fine print. You get the point, I’m sure.
Tip 2: Check if the rates are fixed
If the rates are not fixed, then they can adjust at any time. This means you could end up paying more back than you initially thought. Some loans, like second charge secured loans, can be variable or fixed. Others will always be fixed, like an overdraft repayment.
Fortunately, this information won’t usually be in the fine print, so you won’t have to strain your eyes too much. Be sure to check thoroughly before you borrow anything, though.
Tip 3: Beware steep interest rates
Some loans are easier to borrow than others, as they let you pay back in manageable sums with low interest. And then there are loans like payday loans, where you can end up paying back over 30 percent more than what you borrowed.
It’s a no-brainer really, but you should avoid these steep interest rates. It’s be far easier to just save up each month for that TV or holiday.
Tip 4: Don’t apply for lots of loans
Each time you apply for a loan, it’s noted on your credit report. Applying for too many loans signals to lenders that you’re in financial trouble. And if you aren’t yet, then you will be soon. This makes it likely that not one single lender will touch you, as you’re too much of a financial risk.
Tip 5: Look around and compare different loans
Before you take the first offer that you get handed, shop around and look for the best APR. The annual percentage rate will let you know the ultimate cost of a loan after interest and fees are factored in. The lower the APR, the better the deal.
Also, banks may offer introductory rates for new customers, so consider switching.
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