Things to Consider Before Borrowing Money
No one likes to be thrown in a situation where thereís a need to borrow money. However, should you find yourself in need of financial assistance, here are some of the things to remember.
What You Need the Money For
Before taking out a loan of any kind, it is important that you assess if you really need the money. Unless it is some kind of emergency, it is better to think twice before getting a loan, especially one with a very high interest rate.
The Amount You Need
Once youíve decided that you really need to borrow money, itís time to think about how much you should borrow. Do you have any other funds to access, a coming paycheque, or a bonus? If so, consider paying some of the expenses with cash.
The Lenderís Reputation
Before finalising any deal, itís important to finalise it with a reputable provider. While you can find tons of products everywhere, you need to make sure that you are getting one from a company with a proven track record of excellent and honest service. Itís not only to get competitive rates, but also to protect your vehicle.
Check out Money Supermarket to find a listing of the most popular lenders.
The Overall Cost of the Loan
There are more fees attached to any loan than you realise. Aside from looking at the loanís APR, itís important to compare products based on late payment fees, early repayment charges, and other fees that could shoot the cost up.
How You are Going to Pay the Money Back
Itís not just important to think about how much you should borrow, but also how you are going to pay for it. This is why it is important not to stretch the repayment terms for too long because no one can predict what might happen in the future. If you are self-employed, the more cautious you should be, as the income is not guaranteed.
How Long It Would Take for You to Pay the Loan Back
Generally, the longer the loan lasts, the higher it would cost you. This is why it makes sense to choose a shorter repayment period and a smaller loan, even though many will argue that a smaller loan is more expensive.
What is Your Credit Standing
Lastly, you should also consider how taking out a loan will affect your credit rating. If you just applied recently and got denied, chances are you might need to improve your credit rating first. On the other hand, a loan may also help boost your credit score. Just make sure to space out your applications and pay off your balances on time.
How to Get Approved for Credit Easily
Today, the purpose of having good credit is not limited to purposes such as buying a home or a car. Many providers are checking for your credit score, such as your landlord, mobile networks, and even your cable provider. If you are on the process of applying for credit, first time or not, here are some tips to live by.
Have a Stable Job
More important than your credit score itself is for the lenders to make sure you will be able to pay back the money you intend to borrow. The only means to prove it is by showing your latest pay stubs, preferably with a certificate from your employer. If you are self-employed, a copy of your income statement will be necessary.
However, some institutions also look into how long youíve been with a certain company. For many providers, itís easier to build trust if they know the person that theyíre doing business with has a reputation of sticking around.
Be Easy on Your Loan Applications
For each time that you make an application for loan or credit, a copy of your credit report is requested by the provider. Having too many inquiries may be seen as a red flag, and lenders become quite hesitant if you apply too often.
Do Not Max Out Other Credit Limits
If you have an existing credit already, itís important to be cautious on how youíre utilising the credit thatís been assigned to you. Generally, lenders see you at a higher risk for defaults if youíve been known to max out your lines of credit.
Pay Your Bills on Time
The biggest factor that determines your credit score, your payment history is the most reliable tool for providers to predict how youíre likely to behave in your future payments. Always paying your bills on time can increase your credit worthiness significantly.
Pay Your Dues in Full
In your loan applications, you arenít just checked whether you paid your bills on time, but whether or not you paid them in full. While many may argue that always carrying balances is what creditors love and what will most likely get you another line of credit, this habit can be very expensive. Additionally, carrying balances will increase your utilisation ratio, which in turn decreases your credit score.
Secure a Collateral
If you have bad credit or are just starting to build your credit history, you are seen as a high-risk borrower. One of the things you can do to reduce this risk is by providing collateral. Lenders will be very much happy to grant loans with valuable collaterals tied against them, no matter your credit, because itís the easiest way they can collect their money back should you default.
Have a Guarantor
A guarantor is like your human collateral, because if you default on payments, the creditor could collect the money from the guarantor. Only those with good credit history may qualify as your guarantor. Having a guarantor co-sign your loan not only makes it easier to get approved, but their presence may help lower the rates you will be offered.
Lying on your application, whether intentional or accidental, can lead to rejection. Make sure that you disclose only truthful information to the lender in order to avoid not just denial, but legal issues as well.
Prepare Complete Documents
Lastly, itís important to prepare important documents such as proof of ID, residence, and income. While these are the staples, it would be helpful if you can show bank statements and proof of ownership of some assets that you own.