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Personal Loans

What can I use a Personal Loan for?

Most banks and building societies will offer personal loans. These are unsecured loans which means that you do not need to own a home in order to get one. This might seem like the loans are therefore for everyone, but they will do a credit check to decide whether they are prepared to lend you money. They do not check what the loans are spent on so in theory you can use them for anything. However, this may not be the best plan. There are some circumstances where it might be better not to use a personal loan.

Borrowing small amounts

If you are borrowing small amounts of money, perhaps even up to 35,000 then a personal loan may not be the best option. There are other forms of lending, such as credit cards, which might be cheaper. This is because personal loans can be expensive, as they are unsecured and they are repaid over a long time period. You might find a credit card with a cheaper interest rate or even one that has an interest free period for a while. If you do, then calculate whether it will be cheaper to borrow using this.

The main problem though, with a credit card, is that there are no rules about paying it back. You have to repay a small minimum amount each month but nothing more. However, you will need to make regular repayments, in the same way that you did with the loan, in order to make it a lower cost option. The quicker you can repay it, the cheaper it will be, so you will need to work hard to reduce your spending and increase your income so that you can repay it as soon as possible.

Repayments too expensive

It is also worth finding out how much the repayments will be. It is so important to make sure that you are easily able to cover the cost of these. Look at previous bank statements and think about how much you normally have left at the end of the month. Consider whether you would normally be able to afford the repayments. If you can, then great, you should be able to manage the repayments on the loan. If you normally could not, then you will need to look carefully at what you are spending to see whether you will be able to cut down anywhere so that you can afford to make those repayments. Then think about whether you would be able to cut down in the area for the whole term of the loan, so that you can always afford those repayments. It might seem like a lot of hassle, but for each repayment you miss, you will be charged a fee and these can add up and make the cost of the loan so much more expensive.

Costs too high

It is also good to find out how much the loan will cost you in total. This is good because you will be able to see whether you think that it offers you good value for money. Consider what you are using the loan for and whether you think that it is worth that extra cost. Imagine if you were buying those items at the loan cost and whether you would still buy them and think that they offered good value for money or whether you would avoid them thinking that they were too expensive. In cases such as these, finding a payday lender might well be a better option.

It can actually be quite scary looking at the total cost of a loan. It can be a lot dearer than we think form just looking at the interest rate. It is therefore a worthwhile thing to do as it will allow you to really understand what you will be paying back in total.

Unpredictable future

It is worth also thinking about what your situation might be during the term of the loan. If you think that you will still stay roughly earning and spending the same amount, then this is great. As long as you calculated that you could afford the loan repayments then you can apply with confidence. However, some of us have less predictable futures. It may be tat you job is not secure or that you feel your expenses may go up soon. In these situations taking on a loan may not be a sensible idea as you may not be able to manage the repayments.

Conclusion

So it is possible to use a personal loan for anything you like but it is worth being careful before you take one out. Make sure that it is the best option considering the amount that you want to borrow. Make sure that you can afford the repayments and that you will be able to do so in the future. Also find out the costs and make sure that you are happy that it will provide you with good value for money.

Credit Checks

How to Pass your Credit Check

If you want to borrow money then your lender will normally do a credit check. Only short term loans such as payday loans will not need these to be done. The credit check will look at your financial history from your credit report and will allow lenders to decide whether they want to lend money to you or not. It is good to make sure that you have a good credit report so that you can get accepted for loans when you need them. There are things that you need to bear in mine.

Different requirements from lenders

Firstly it is important to understand that different lenders have different requirements. You might think that if you are in no debt and have never had trouble repaying a loan or paying bills, then you will be the perfect candidate. However, this may not be the case as lenders make more money out of people who miss a few repayments and then have to pay a fee for that, than they do for those who have no debt. Consider if you have a credit card and repay it in full each month, they make no money from you, but if you only the pay the minimum then they make interest form your each month. Therefore there is no perfect credit score or report, but you still need to be aware of a few things that you can do to make yourself more likely to be accepted for a loan.

Check report is correct

One of the most important things to do is to check that the credit report is correct. You can look at your credit report for free and therefore see all of the details on it. Make sure that it is right and that it does not include any loans that have now been repaid or any other incorrect information. If there is something wrong with it, then get it changed as soon as possible so that you increase your chances of getting that loan. To do this firstly contact the company involved with the incorrect information – perhaps a utility company saying you missed a payment and explain that you want to dispute that. If they agree with you then they should send that change to the credit reference agency. If no change is made, then you can write a 200 word report to go alongside your credit report that anyone checking it can see which should allow you to explain why it is incorrect. You can do all this for free or the cost of a few phone calls. However, there are companies that will offer to do it for you but they will charge you and it is not really necessary to pay someone to do it for you. This should be enough to stop you being turned down for credit due to incorrect information on your credit report.

Consider income sources

It is worth thinking about what income you have coming in and whether this is good enough to satisfy those looking at your credit report. If you have a permanent job then this will look better than if you have a temporary job or are self-employed. The amount of income your earn will also be a factor, obviously higher earners will be more likely to be able to make repayments and therefore to be better candidates for a loan.

If you really want a loan, perhaps a mortgage so that you can buy a home, then you should think about whether you can improve your income. You will need a good income to make those mortgage repayments anyway and you will be more likely to be accepted for a mortgage if you have a better paid job and so it works well both well. It might be that you can work more hours in the job that you are doing or get a temporary job made permanent. You may be able to find extra ways of making money to boost your income too, perhaps by working evenings and weekends. It is not always easy to do this but it is worth considering your options to see whether you can improve your situation.

Consider regular payments

It is good to look at the items that you pay for regularly. Things like insurance, utility bills, phone and television contracts, for example. These need to be paid on time in order to show that you are a reliable payer. If you do not have any of these in your name, perhaps because you live with others who have them in their name, then consider swapping names on some things. This would allow you to have a record of payment and could help improve your chances of getting a loan.

Do also make sure that any regular payments are always being paid. If you have a tendency to forget then set up a direct debit so you cannot forget. This will improve your credit record compared with seeing missed payments, even if you paid them once you got a warning that they were overdue. It will also save you money as missed payments tend to have fees.

Consider loans

It is also worth thinking about the loans that you have and how they reflect on you. If you have lots of different loans, then it could be better to get some paid off. This will look better and the record will show that you can pay off loans. Things like overdrafts and credit cards can be paid off at any time. You might think having savings behind you is good, but if you use them to pay off your loans, then it will actually be better. Not only will it reduce your risk to lenders as you have less loans to pay but it will also save you money, which may reduce your need for a loan in the first place.