Getting finance can sometimes be the only way you can achieve a few of your goals, whether it be a mortgage for the dream house you want or a loan for a family-size car. But it’s not just the big purchases we need to finance every now and again, with life sometimes throwing the unexpected our way. If you aren’t fortunate enough to have a savings nest egg to dip into when you need it, small loans and other credit can be crucial. No matter the size of the loan, you’ll need to be prepared for it, so here are a few tips to keep in mind before applying.
What Do You Need the Loan For?
Choosing the right type of loan for the situation is important, so think about why you need the loan and choose the best option for this. For example, if you need funds for an emergency such as an unexpected car repair, you need your car to be up and running as quickly as possible. In this instance, finding a loan that can pay-out quickly and resolves this until your next salary date is ideal. Many payday loans online will provide this type of borrowing for a small amount and provide the flexibility to pay back in one go or multiple repayments. This can be a better option than taking out a larger personal loan or using a credit card instead, but you should carefully check the terms first before going ahead to ensure you’re happy with the interest and repayment terms.
Can You Afford It?
Most importantly, can you afford to take out a loan at this moment in time? If like the above you have an emergency to resolve, borrowing can be one of the only ways to resolve this quickly if friends and family can’t help and you don’t have any savings. With other situations such as wanting to buy a new car, you should carefully consider if you can afford this. The best way to determine your affordability is to take the time to review your household income and compare against your outgoings, both essential, such as your mortgage payment and utility bills, and non-essential, such as clothing, leisure and restaurant bills. You’ll be able to determine your disposable income and budget where necessary. If you are left with money to spare, you can then decide on how much you can comfortably afford each month for a loan. This will avoid you taking on a larger debt than you can manage.
What’s Your Credit Rating like?
You should regularly check your credit report to see your current credit score and determine if your finances are in a good place to be able to borrow further. If you have a low credit rating, you’ll be able to see what’s causing this by checking with a credit reference agency and put steps in place to improve your score. If you have a good or excellent score, then this means the chances of being approved are much better but still doesn’t guarantee you will be successful. Having a bad credit rating doesn’t mean you can’t get any borrowing product but will reduce the options available to you.
Along with checking your affordability, credit rating and the type of loan you need, you can apply with confidence and avoid unnecessary declined applications. Remember, being well prepared before applying for a loan is always the best policy.