Until you have complete financial freedom, you’ll occasionally find yourself worrying about money. In fact, you may find yourself in need of a loan at some point. The first question you should ask is whether or not you need one. The next question concerns how much you can actually get out of a given loan.
In order to get the best deal, you need to look for a loan that works best for you. There are so many different types of loans out there. And even similar loan types will have different conditions and plans across lenders. So if you want to get the most out of your loan, you need to go into this process prepared. Here are some of the essential elements you need to consider.
Would a credit card serve you better?
A lot of people just to the conclusion that a loan is the only thing that can help them in a particular situation. But what if a credit card would help you out more than a loan would? It’s certainly true that you need to research both options carefully. After all, plenty of people also lean towards credit cards when a loan could serve them better. The benefit of a credit card is that you’re more likely to be able to borrow money from it interest-free. Of course, you’d have to pay off the debt within the agreed interest-free period.
Short term or long term?
The “term” you need to concern yourself with matters a lot. Sometimes, your circumstances mean you may not have much choice in the matter. If it’s an emergency and you need it very quickly, you’re probably going to have to go with short term. This may work out better for you as they allow for quick repayment. It means the process isn’t dragged out for too long, which can help reduce the risk of a bad credit score due to future disaster. CashFloat payday loans are an example of such a loan. Long term loans can land you larger amounts, but often require much stricter credit checks.
Have a good look around
So you’re looking for a very particular type of loan. As I said earlier, the conditions of a particular loan type will differ across the many companies offering it. You shouldn’t just assume that all loans of that type are going to require or not require certain things from you. Basically, don’t assume they’re all the same. Make sure you have a good look around at different lenders before you make a decision. Remember that these lenders will also have different criteria when it comes to credit checks, too. This is another reason why you must “shop around”. Even if it’s an emergency, take your time here!
Will early repayment cost you?
The reason many people go for short term loans is because they want to whole thing over and done with as quickly as possible. The problem with a lot of short term loans, however, is that the interest rates can be astronomical. But a person who wants to get the loan and pay it off quickly will have the money to pay it all back soon enough. So this person’s solution is to get a long term loan that gets them more and works out cheaper, then pay it all of early. Sounds good, right? Why wouldn’t a lender want an early repayment? Well, it’s because the longer you’re in debt to them, the more they profit. So an early repayment may come with fees or penalties. Look out for this.
Borrow more?
As I’ve hinted at before in this article, larger loans tend to come with lower interest rates. These calculations tend to work in brackets. Let’s say, for example, you want to borrow £9,000. This is within a low bracket of the lender’s. They may charge 5% interest for, say, the £5,000 – £9,999 bracket. But in the £10,000 – £12,999 bracket, they only charge 3%. See what can happen here? It means that if you borrow more, then as long as you pay it back, you actually save money. You literally get more for less. These are rough figures, but this practice is something you need to pay attention to.
Read that small print!
No matter what the flesh-and-blood loan salesperson is telling you, you must check the contract. Sure, oral contract laws might protect you to some extent if you’re being lied to. But it’s really best to make sure the small print doesn’t contain information that can taint the deal. It might turn out that the deal is much more expensive than you thought!
