Do’s and Don’ts when applying for a loan
With Net lending to individuals in the UK reaching £89m, the amount of people applying for loans and being approved for loans is increasing. Deals vary from lender to lender in terms of interest rates and available amounts, therefore it’s imperative that you chose wisely to ensure you get the best loan deal.
Identify why you need the loan – applying for a loan to cover living costs is a sign that you’re in financial difficulty and would benefit from debt advice instead of obtaining further credit. Likewise applying for a loan to cover a luxury holiday is a sign that you are overspending / living beyond your means and likely to hit debt problems. Applying for a loan to make necessary home improvements that will add value to your home, or for other necessary large purchases are usually valid reasons for applying for a loan.
Ensure that you can afford the loan – you should only apply for a loan if you can comfortably afford to repay the loan each month. Have a look at your finances and create a budget to see how much money you will have left each month after paying all bills / living costs / debt repayments. You should only consider a loan if you have disposable income each month.
Shop around – there are many loan comparison websites on the internet, register with these to see what loan options are available to you.
Repay the loan on time – failure to repay your loan on time will have serious consequences that can result court action and affect your ability to be approved for credit in the future.
Apply for multiple loans at the same time – doing so is likely to affect your credit rating, shop around first on comparison websites to determine the lender that is best suited to you and apply with them.
Borrow more than you can afford – this is the direct route to debt problems as it demonstrates overspending. If you need to borrow be realistic.
Avoid contacting the lender if your income circumstances change and you cannot afford to repay the loan. Many chose to ignore lenders when they hit debt problems due to loss of income such as redundancy or unemployment. Contact your lender straight away to discuss your circumstances. Some lenders are very understanding in these circumstance and are happy to allow you to defer payments or arrange an affordable repayment plan.