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Taking Out a Personal Loan: The Rules

January 8, 2014 by lucas in Loans

Taking out a personal loan is easier than ever, and could be a lot more tempting now that all of the excitement over Christmas and new year has left us almost penniless. You can pretty much take out a personal loan for anything: a car, a house, the bills, and more. However, there are some important things to remember so you don’t find yourself out of pocket. Here are the rules the taking out a personal loan:

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Always Shop Around

It’s wise to shop around if you’re spending a good amount of money on anything at all, but it especially counts when planning on taking out a personal loan. Compare the annual percentage rates of each loan to get an idea of what you’ll really pay back.

Always Read the Small Print

You should always read the small print of a loan before applying, as you might realise you’re not eligible anyway and avoid affecting your credit rating.

Consider Charges for Early Repayment

There might come a time when you want to pay off your loan early, except some providers might charge you for this. Make sure you know how much you’ll be charge if you pay off your debt in good time.

Take a Look at Your Credit Rating

It’s absolutely essential that you check your credit rating before applying for a loan. If you have a bad credit rating, you could be offered a more expensive deal than the loan you applied for to start with.

Consider a Credit Card

Before you go out and apply for your loan, consider a credit card first. This might save you money in the long run, you can find many deals with 0% interest and you can spread out the cost of purchases.

Borrow More Money

Sometimes, even borrowing an extra £500 can result in you saving more than that over the period of the loan. The larger the loan, the lower the interest rate!

Apply Wisely

Make sure that you apply wisely for your loans, as anything you apply for could damage your credit rating – not good if it’s already in bad shape. Get a copy of your credit rating from one of the lead companies, such as Experian, and show to banks and other loan companies to avoid making a footprint on it.

Always Consider The Risks

There’s the option of taking out a secured loan, which is much riskier than an unsecured loan. You could lose your car, home, and other things valuable to you if you fail to consider the risks properly. Unless you’re 100% sure that you’ll be able to pay back the money, don’t do it – there’s less of a risk for lenders and more of a risk for you!

Here’s a good example of a responsible lending statement, so you can further weigh up the pros and cons of taking out any kind of personal loan. Above all, remember to be sensible – you don’t want to get yourself too deep into debt!