In an ideal world, we would all be debt free and cash would be king. Sadly, this is rarely the case and most families have some level of debt. A mortgage is the most common type of debt because buying a home is expensive. Next on the list is credit card debt, shortly followed by personal loans. You may also have student loans or a car loan that needs to be paid every month. Not surprisingly, this is a lot of cash leaving your bank account on a regular basis, so it makes sense to think twice before you sign up for any kind of additional debt.
Personal loans, such as those offered by themoneyhub.co.uk, are a useful way of paying for bigger purchases such as home improvements and expensive holidays. However, it isn’t all plain sailing and if you borrow money you can’t afford to pay back, your credit rating will be shot to pieces. Here are some tips for anyone considering taking out a personal loan.
Can You Afford the Repayments?
First things first, think very carefully about whether you a) need to borrow the money and b) whether you can afford to take out a loan. Saving up for a big purchase has rather gone out of fashion in recent years, but if you can afford to wait to buy, this is the best way forward. If you can’t wait, draw up a budget to make sure the loan repayments won’t push you into poverty for years. After all, no flat screen TV is worth living on baked beans for five years.
What’s Your Credit Rating?
The better your credit rating, the more choice you will have. Check your credit rating for free and if you notice any discrepancies, fix them before you start applying for a loan.
Shop Around for a Good Deal
Rates vary between different loan providers, so shop around to find the best rates. If you have a good credit rating, most loan companies will be happy to offer you a loan, but if your credit rating is poor, you will be very limited.
Early Repayment Fees
If there is any chance you will be able to repay the loan early, check the small print to see if the lender charges for an early loan settlement. If you miss this and then decide to repay the loan early, it will cost you extra.
Borrow a Larger Amount
The more you borrow, the lower the interest rate will be. Most loan companies drop interest rates at fixed incremental levels. Play around with the borrowing amount and see if there is any benefit to be had by borrowing slightly more. It could save you money.
Secured vs. Unsecured
Secured loans are cheaper, but they are secured on property and you could lose your home if you fail to make the loan repayments. Be aware of this key difference before you opt for a secure loan over an unsecured one.
Personal loans are very useful at times, but make sure you are clued up before you apply for one.
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