What to Consider when Deciding to Apply for a Loan

It has happened to us all at one time or another. A sudden medical emergency, financial loss, job loss or other unexpected event that has left us seriously in the hole, needing to find a way to make up those pounds that were lost. Facing financial hardship is one of the scariest, most uncertain things an adult can go through, and that desperate feeling is something nobody should have to deal with. 

Photo Credit: Andrea Piacquadio

Many of us decide to apply for loans when we’re facing financial uncertainty, and for good reason. Loans can be an easy and relatively stress-free way to get the money you need, fast. With so many different types of loans out there, you can apply for the type you need and get the money you require, from small amounts like £100 up to £10,000 or more. 

However, you should take the time to do a little research on the types of loans that are out there, and which one is the best bet for you, based on your own specific circumstances. Here are a few things to consider: 

What Type of Loan

There are loans from reputable banks, all the way down to payday loans, and which one you apply for depends on a number of factors, such as how much money you need, your credit score, and your needs in terms of interest rates and more. 

For example, if you just need a quick loan of a small amount, say £500 or less, to get you through a slump, but you don’t have the greatest credit and you need it fast (i.e. you don’t have time to go through a lot of paperwork and wait days for a decision), a payday loan is probably your best bet. Most offer a very easy application form that only takes a few minutes to complete with a decision in minutes. Payday loans often allow loans to individuals regardless of their credit score, so as long as you have steady employment and some collateral, you will likely be approved. These loan companies often work with you on payment arrangements as well. One downside is that the interest rates can be rather high, and you run the risk of losing your collateral if you default on payments. 

If you’re in need of a much larger amount of money, for medical bills, home expenses or something larger, contacting your bank for a loan might be a good idea. They’ll go over your application with you, letting you know all the information they need, and will make a decision based on your history at the bank, credit score, employment and other factors. If you have decent credit and a good history of employment, you’ll likely get approved for a larger loan with a lower interest rate. 

How Much you Need

It can be tempting to apply for more than you need, but exercise caution. Obviously, the more you borrow the more you must pay back, and the larger the loan the larger the weekly or monthly payment. Make sure you have the ability to pay it back before agreeing to accept a loan. 

Make Sure you Have Collateral

If you own a car, a home or other valuable assets these can be used as collateral. Without them, you’ll have a much harder time getting approved for a loan. 

Applying for a loan is a relatively easy process once you’ve got these details sorted. Deciding what type of loan and from whom is a tricky decision but once you’ve gone with the right lender, you should be approved in no time at all.