Borrowing a loan has become an easy option these days with favorable interest rates, easy repayment terms and longer timelines.
While borrowing a loan, it is essential to plan out your finances and opt for the best possible combination available in the market.
At some point in time in our lives, many of us may feel the need to apply for a personal loan. There can be different reasons for different people for a planned purchase or an emergency or a debt repayment.
Personal loans don’t need to be costly and make a hole in your pocket. When chosen wisely, they can be of great help in managing your finances.
To get comfortable on your finances and loans, you can follow these simple tips to get the right deal for you.
Decide your borrowing amount
To get the best deal on your personal loan it is essential to answer a few questions from yourself, i.e. why do you need money, it is imperative to borrow and what is the amount you need to borrow?
Apart from answering these questions, it is essential to analyze your repayment capacity as well. Once these questions are answered, it will be easier for you to find a suitable lender and favorable interest rates.
Check your credit history.
Credit history is one of the crucial factors that determine your loan amount and interest rate. Most of the direct lenders check your credit history and rating before considering you for a loan.
Credit Score and interest rate are indirectly proportional to each other. The higher the credit score, the lesser the interest rate is. In case of a low credit score, you can work on your rating and improve it.
Before borrowing a loan, you may be categorized in terms of your credit rating. If you have a defaulted payments and CCJ’s in the past, you may be classified as a ‘high-risk’ borrower.
In this case, you will be offered high-interest rates that are being charged from bad credit borrowers.
Hence, before applying for a loan, check your credit score. Keeping an eye on your credit score also gives you a clear picture of your financial position and the deal you will get from a lender.
Loans comparison
To get the best rates and prices, it is always essential to compare various products and services in the market. The same rule applies when you are applying for a loan.
To seek a financial loan, it is essential to get a fair deal on your loan to ease off your financial burden.
While comparing the available loan options in the market, it is vital to compare the cost, interest rates and the repayment timeline for every loan and then make a wise decision.
Before considering all the factors, check for the application criteria to ensure your loan eligibility in terms of your credit rating.
Various loans are available in the market, i.e. Secured loans, unsecured personal loans, debt consolidation loans and many more.
Look out for options.
Loyalty is an essential virtue in leading a peaceful life. While considering borrowing a loan, it plays an important role.
It is natural to go with the bank that you already have an account with. But that is not rewarding always.
A new lender who is trying to attract new customers may be able to offer you better deals than banks and seasoned lenders.
A good deal includes low-interest rates and easy repayment terms. This makes up a perfect reason for the comparison between the loans before applying.
Importance of loan term
Repayment terms form an essential part of a loan. It includes the timeline for loan payback. Generally, if the loan term is longer, you end up paying more interest rate.
Fix your interest rate
To ensure the same interest rates over longer loan terms, it is essential to fix your loan interest rates. Even if there is a rise in the interest rates, your interest rates will remain the same and unchanged by setting the interest rate. This makes your monthly budgeting easier and staying on top of your finances.
Say no to payday loans
A quick money offer can be tempting. If you are in dire need of money, avoid borrowing these quick loans known as payday loans.
These loans are offered irrespective of the borrower’s credit rating and are available to people with bad credit as well.
The interest rates on these payday loans are enormously high and trap to the vicious cycle of debt. Payday loans are no guarantor loans with instant approval.
These loans very subtly force you to pay much more times than the principal amount.
Avoid taking automatic PPI with a loan
If your loan offers you PPI (Payment Protection Insurance), it is a good option to consider. In case of non-repayment of your loan, PPI protects you from any consequences and covers the loan.
But before you opt for a PPI policy, look for other options such as independent and single policy covering all your outgoings.
