With the rising cost of living and slow growth in wage, more and more Britons are turning towards personal loans (instalment loans) to manage the expenses of their everyday life. These loans are fairly flexible in terms of the repayment period and are easily accessible. High street banks do not have any provision to offer a loan of a small amount. The process of applying for an Instalment Loan is comparatively easier, faster and convenient. However, there are some points that you must take into consideration before applying for these loans.
We have listed the top questions that you should ask yourself if you’re planning to borrow a loan for meeting your financial requirements.
What Are The Interest Rates?
Borrowing money comes with a cost as we are all aware of. The lenders charge an interest rate to the amount that you borrow from them. The interst rates depends on various factors like:
- Your credit score
- Your credit history
- The amount that you borrow
- The length of the loan
Different loan providers offer different interest rates. Therefore, it is best to look around to know what rates are available for you. A simple comparison check will help you find the one that suits you and your financial needs. Instalment loans are a kind of personal loan that doesn’t require you to find a co-signor or to use your home or any other valuable asset as collateral. So, the rate of interest charged on these loans is comparatively higher. Whenever you are comparing the different options, make sure to shortlist at least 4 to 5 lenders as this will make it easier for you to choose the right one.
How Long Do You need It?
Numerous loan providers have different products that are customised according to to the affordability of the customers. If you need a loan of 6 months you may apply for it. You do not have to choose the option of paying it over the year. If your financial status allows you to repay it within 6 months on time and in full, then go for it! Timely repayments have a huge impact on your credit profile as well. It will build and maintain your credit score and that means you will get offers for personal loans at low interest rates in the future!
Will There Be Any Payment Penalty?
A prepayment penalty is an additional fee that you have to pay if you decide to repay the loan before the agreed end date. Some of the lenders charge a prepayment penalty, also known as early repayment fee. However, some of the lenders do not charge you any additional fee for repaying the debt earlier than the date that was agreed beforehand. Lenders charge this fee to recover the interest amount that they might lose if you decide to make the payment earlier. Therefore, before signing on the dotted line, read the Terms & Conditions of the lender and ask questions that you might have to know what you’re entering into.
Is It Affordable?
Calculate the amount that you have to pay towards your debt each month beforehand to know whether you can afford the loan. Prepare a list of all the expenses that are essential for you and then deduct that amount from your monthly income. The result will be the money that you will have after spending on the essentials. If you have enough money left to repay the debt and for your other expenses of the month – then you may consider borrowing a short-term loan. However, if you do not have enough money left to support your existence throughout the month, then you must consider other alternatives to borrow money rather than depending on a financial product. Try asking your friends and family for lending you a helping hand and reach an agreement with them to repay the debt.
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