Opting for a financial loan in times of financial difficulty can be difficult, particularly if you are unfamiliar with how they work. With complicated APR’s as well as interest rates and default fees, there are a number of elements to consider. In this article, we will be providing you with information into what you should look for before choosing a personalised loan in 2020.
Loan Amount
Though this may not seem like a deciding factor, the loan amount can have a vast amount of impact when it comes to choosing your personal loan. If you are looking to borrow a large amount of money for home improvements or unexpected damage to your home a £10,000 loan is a secured option that will allow you to borrow this amount. As part of the secured loan option, you will be required to provide collateral, this will cover the cost of the loan should you be unable to pay it back. This reduces the risk to the lender and allows you to borrow more as a result.
Interest Rate
This is the first thing that you should look for when choosing a loan as this is the amount you are borrowing combined with the repayment methods that will determine the amount of interest that you pay. This will need to be calculated beforehand to ensure that you are able to pay back the money that you owe. BY looking into the interest rate, loan term and APR before applying for any loan type, you are able to make sure that the loan is affordable based off of your monthly income. In addition, there are a number of affordability checks conducted during the application process in accordance with the FCA regulations. These will consider your monthly income and the APR that you are paying to ensure you are able to pay back the full loan amount on the allotted time frame. If you are unable to pay it back, you will not make it through the pre-approval process.
Credibility Of The Lender
In addition to the interest rate and the loan amount, it is important to check the credibility of the lender. With a number of reviews online as well as word of mouth from family members that may have used them in the past, you are able to make an informed decision. It is important to look into the background of all these lenders as this will ensure that you are only borrowing from those that are FCA approved. This will ensure that you are protected by regulations throughout the loan term and will prevent default payments from becoming too expensive in the long term.
Flexibility Of Repayment
Repayment methods can be difficult to meet at times due to financial uncertainty and other crucial elements therefore looking at flexible repayment methods is a simple solution to this. This will allow you to suit the repayment methods around your payday, allowing you to make sure you never miss a repayment. In addition, customer service is important to look for as this will allow you to contact the lender directly to discuss arrangements. This will ensure that they are aware of any financial difficulties that you are experiencing and will allow you to avoid defaults on payments as a result.
Fees And Charges
The final element to consider is any fees and charges that may be considered during this process. This will make sure that there are no hidden charges throughout the loan term. It is important to be aware of any additional fees such as default payments as well as interested rates that can be added on top of the borrowing amount as this can lead to you paying back more in the long term. Though this can be avoided through careful selection, it is important to read the fine print as this is often something that is overlooked by those applying for a loan.
The Current State Of Your Credit Score
Your credit score is important at every stage in your life, but when applying for financial aid, this is when it is needed. In order to be considered for a loan of any type, your credit score needs to be positive. If you have any outstanding debt that could be affecting this, it is important to pay it off as this will allow you to build your credit score back up. This will not only aid you in applying for a personal loan in financial difficulty, but it will also improve your eligibility when applying for a mortgage or other form of financial aid in the future.
With this in mind, there are a number of contributing factors to consider when choosing a personal loan type as this will ensure you can afford repayment methods. Whether you are using a secured loan or an unsecured loan, using the above methods can help you to reduce costs every time.