When you don’t have the cash to pay for something on your own, the next step for most would be to borrow the money. Though obtaining a loan is a common practice for consumers, it is not a process that can be completed without special care. With several lending products on the market and even more eligibility requirements, it is vital that borrowers have done their due diligence to ensure that they can uphold their responsibilities.
Check Your Credit
Your credit score and history say a lot to a lender. It shows them the type of debts you’ve been responsible for in the past and how well you did at repaying them. A credit history that reflects timely payments, a well-balanced income to debt ratio, and no collection accounts says that the person is financially responsible and can be trusted with a large sum of cash. A credit history with sporadic payments, more debt than income, and a plethora of closed, charge off, and collection accounts send the message that you’re high risk.
Knowing your credit status ahead of time not only lets you know your chances of being approved for a loan, but it also lets you know what type of loan you should be applying for. For example, if you have bad credit, applying for short-term advance loans is a better option. Most don’t require a credit check which would improve your chances of approval.
Check Your Budget
Though it would be nice to keep the cash a financial institution lends you, you’re going to have to repay it. All too often consumers enter into a loan agreement without having a clue as to whether they can afford the repayment amount. You should have a clear understanding of your financial circumstances to determine if you can repay the loan, and if so, how much you can afford. If you only have a few bucks leftover after paying for your necessary bills and expenses then you know you can’t afford a high loan payment.
Biting off more than you can chew will backfire. If you accept more than you can afford to repay it will essentially result in late payments and the need to fall behind on other accounts just to get caught up. Knowing what you can afford ahead of time lets you know if you should or shouldn’t sign the loan agreement.
There is more than one avenue consumers can use for borrowing funds. Whether you choose to go to a local bank or apply online through a trusted lender, you should shop around to ensure you’re getting the best overall value. Compare service providers using some basic criteria. The company should have a great rapport which can be viewed online by checking the Better Business Bureau or consumer reviews. They should have flexible repayment options and reasonable fees. Lastly, they should be easily accessible and offer quality customer service.
Know What is Required (Fine Print)
Before signing on the dotted line of any type of loan it is imperative that you have a full understanding of what is required of you as a borrower. Review the fine print to determine what the lender expects of you. Look for answers to questions like: How frequently will payments be collected? What are the fees associated with the loan outside of interest-rates? How long do you have to repay the loan? What forms of payment can you use? What happens if you fall on hard times?
Whether you’re faced with a financial emergency and need an instant approval loan or just want to borrow some money for a much-needed vacation or home renovation, it is imperative that you do the work before accepting the funds. Seeing your financial circumstances through the eyes of the lender, knowing what is required of you as a borrower, and shopping around for the overall best quality are all important steps you want to take to make the most informed decision – and prevent you from biting off more than you can chew.
Katie is a finance specialist with one of the biggest firms in London. From savings to investments, there’s nothing she can’t advise on and she’s here to help spread the word and help you on your way to financial freedom.