Four Things to Consider Before Applying for a Loan
From paying off a wedding to buying a new car, people apply for loans for a number of different reasons. Getting a loan can be a quick process, but it’s something you need to think about carefully beforehand.
We’ve put together a handy checklist of a few things to think about before applying for a loan.
What type of loan shall I get?
Although you might think you need a loan, it can be tricky to know what type of loan is best for you. From secured loans to debt consolidation loans, there are many types of credit available on the market, each offering something different depending on your circumstances.
If you already have multiple repayments to make each month, a debt consolidation loan could be for you. A debt consolidation loan combines your monthly debts into one monthly repayment, making your finances much easier to manage. Or, for those needing to borrow a larger amount, usually £25,000 and over, a secured loan might be the best option. A secured loan means an asset, usually a house, is used as collateral, which can be put at risk if repayments are missed.
An unsecured loan, also known as a personal loan, is one of the most popular loans on the market. They’re usually used for people wanting to borrow anything between £1,000 and £25,000.
How can I check my credit rating?
Before applying for a loan, it’s a good idea to check your credit rating to see if it’s correct. You can do this for free using a credit reference agency, such as Equifax, Experian and Callcredit.
Your credit score is used to show lenders the likelihood of whether you’ll repay your debts. From previous loans to how you manage your finances, your credit score is based on every financial decision you’ve made in the past. If you have a good or excellent credit score, it’s more likely that you’ll have a better choice and cheaper rates, as you’ll be seen as a responsible borrower.
Can I afford it?
When applying for a loan, you need to make sure that you are able to afford the repayments for the term that has been set. Generally, you’ll be paying off a loan over a set period of months or years, so you need to think carefully about your future finances and any large outgoings in the near future. Failing to repay your debt will more than likely damage your credit rating, and, depending on the type of loan, can put the assets that you’ve provided as collateral at risk. If you feel like you’re struggling to manage your finances, you can contact the Money Advice Service, for free and impartial money advice.
How do I find the best loan for me?
Many people go with the easy option of taking a loan out with their existing bank, however, it’s always best to shop around; both online and in-store. There are many price comparison websites which directly compare the APR, initial set up costs and much more across a number of lenders, helping you to make the right choice.
Some sites even offer a pre-application eligibility checker, which allows you to evaluate whether or not you are likely to be accepted without damaging your credit file or leaving a hard credit footprint. Here at Asda Personal Loans, we use a panel of lenders to help find the best loan for you based on your personal circumstances without affecting your credit rating.