5 Top Personal Loan Tips
By Space Coast Daily // November 2, 2021
If you are looking to take out a personal loan for the first time, you may find yourself a little overwhelmed by the market. There are so many different companies, offering multiple options, and throwing around endless amounts of financial jargon.
If you are looking for a guiding hand then you have come to the right place. Below, you will find 5 tips that will help you to find the perfect personal loan for you.
#1 – Only apply for one loan at a time
When you are looking for a personal loan, you should take the time to research a loan before you apply for it. And you should only apply for one loan at a time.
Ideally, you should apply for as few loans as possible. Why? Well, this is because applying for a loan goes on your credit record as does every loan you are rejected from. When you are rejected from a loan it affects your credit score negatively.
If you were accepted by multiple lenders then you would have to pay back multiple loans with multiple different interest rates that can really add up. You may then find you are unable to pay back everything you owe the lender.
Another downside of applying for multiple loans (and getting rejected from them) is that all the banks can see that you are applying for loans with other banks. To them, this makes you look unreliable.
The safest option for you is to not rush the process and only apply for one loan at a time.
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#2 – Pick a reliable lender
Another thing you should be aware of when applying for a personal loan is the credibility of the lender. While there are many legitimate lenders out there, there are also some lenders who are not quite what they seem.
The personal loans market is oversaturated with lenders. If you see a lender offer something that seems too good to be true, you should take a closer look.
There are many lenders out there who are not part of any financial alliances or they are based overseas where the financial conduct laws aren’t so strict. These lenders can be dangerous because they are not regulated in the same way as banks are in the USA or even in Europe.
If you take out a loan with an unregulated lender then there is no guarantee that they will treat you fairly, or that they won’t raise your interest rates without warning.
When you are applying for a loan online you should make sure they are insured and part of a financial alliance.
#3 – Pick the right loan for you
There are quite a few different types of personal loans, however, the three most common types are Payday Loans, Quick Cash Loans, and Personal Installment Loans.
Payday loans are the perfect type of loan for anyone who needs money quickly and can pay it back in one go when they are paid next.
They are also a good option for people who have bad credit but need a short-term loan. Payday loans are usually approved for anyone, no matter their credit score. People with low credit scores should just expect to pay a larger rate of interest.
These loans are referred to as Payday Loans because these loans often need to be paid back within 8 weeks. Payday loans differ from the other types of personal loans because they typically have to be paid back in one go (with interest). The interest rates on these loans are usually higher than other types of personal loans.
Quick Cash Loans are loans that can be applied for quickly. They are usually medium-sized loans that can be borrowed for up to 6 months and are paid back in installments. They are also good options for people with bad credit scores.
Personal Installment loans are usually larger personal loans – they can be up to $50,000. They can be spread out over multiple years or just a few months. And they typically have lower interest rates but are paid back over a longer period of time.
#4 – Consider taking out PPI
PPI stands for Payment Protection Insurance. PPI is sold to cover any kind of loan product that requires repayment. PPI will cover you if you become unable to make your payments – for example, if you are made redundant, become injured and are unable to work, or you die.
PPI can help you in two ways. It can stop your change in life circumstances ruining your credit score. It can also help to protect you from debt collectors and from going deeper into debt.
PPI can also prevent your debt from being passed onto your family if you pass away. For many people, this is the most important part of PPI. Passing on any kind of debt to your family can be unfortunate if they are not prepared to handle it.
#5 – Be aware of your credit score before you apply
Our final tip is to check your credit score before you apply for a loan.
As we mentioned above, getting rejected for a loan will negatively impact your credit score. However, one of the easiest ways to avoid rejection is to research the loan’s requirements before applying for it.
Most lenders will be very open about what credit score you need to get approved for their loan. If you are aware of what your credit score is then you can avoid applying for any loans that you don’t score high enough for.
If you are looking for a personal loan, but not urgently, then you should consider trying to improve your credit score before applying for these loans. There are many ways you can do this, but the easiest way is to pay off any loans that you already have outstanding.
It may be worth waiting until your credit score is better to take out a loan as you will have to spend less on interest payments.