The Basics of Personal Loans – What You Need To Know About the Most Popular Type of Debt in the UK

Personal loans have quickly become one of the most popular types of debt in the UK. They offer individuals a great way to borrow money without having to worry about collateral. Most lenders do not require that borrowers have a perfect credit score, and some may even give you a loan if you do not have a stable source of income.

This having been said, as with any type of debt, personal loans also come with several disadvantages that you must take into consideration in order to avoid them lowering your credit score. Here are the main things that you need to keep in mind:

What are the main advantages of personal loans?

Personal loans or even guaranteed payday loans will allow you to borrow more money than you could by using a credit card. Where credit cards often have £1000-£3000 limits, the amount of money that you can get through a personal loan is usually calculated according to your credit score and monthly income.

Most lenders will charge interest rates that are considerably lower than those of other types of debt, including credit cards. This is especially true when it comes to large balances.

Repaying a personal loan is done in installments, making it easy to include the expense in your monthly budget. Depending on the terms and conditions of the agreement, you may have to pay a fixed interest rate. This can make it easy to also automate the payments due to the fact that you will have to repay the same amount of money each month.

Flexible in terms of duration and purpose

You are able to choose the period of time during which you will have to repay the loan. This means that you will be able to make the monthly payments as small or as large as you like.
Personal loans are also very flexible in terms of purpose. Unlike other types of debt, the money that you borrow through them can be used for anything that you like, from medical procedures, to vacations.

Know the dangers of personal loans

They can be very expensive :- Not all lenders advertise the interest rate of a loan or its type. If you are not careful, you may be stuck having to pay considerably more than what you initially thought, especially if you get a variable interest rate loan.
They can be restrictive :- Most banks will not give you a personal loan if you either want to borrow less than £1000 or for under one year. This only makes personal loans useful for those looking to borrow large amounts of money, for an extended period of time.
They depend on your credit score :- The interest rate that banks give you often depends on your credit score. The lower the score, the more expensive the personal loan will be.

Conclusion

These are the main things that you have to keep in mind when considering taking out a personal loan. Even if this type of debt is widely used and it often seems safer than others, there are still risks that come attached to it.
Generally speaking, if you figure out how you will repay the money before getting the loan and take precautions to ensure that you won’t miss any monthly payments, it should be enough to keep you out of trouble. Personal loans offer a high degree of financial flexibility, but they can still have a serious impact on your credit score.

What Is Debt Consolidation and How Can It Help Bring Order To Your Financial Life?

It is almost impossible for an individual to go through life without using the services offered by banks, at least a couple of times. Our society has come to depend on various types of debt in order to enable us to purchase houses, cars, and even to pay for holidays.

This having been said, most lenders are constantly competing amongst themselves, in an attempt to offer the best possible terms and conditions. In return, most individuals end up taking out several loans, one on top of the other, and some also get credit cards that they use on a regular basis. This behaviour can quickly lead to total financial chaos. Accumulating a lot of debt makes it difficult to keep track of all the monthly payments that you must make, especially if each loan has a different or variable interest rate.

Luckily, there is a way to reorganise your finances if you have too much debt to keep track of. Debt consolidation is one of the most basic and easy ways to make your current debt cheaper, as well as to ensure that you never miss a monthly payment.

What is debt consolidation?

Debt consolidation refers to a loan that is specifically designed to give you the resources to pay off other types of debt. In essence, if you have three £3,000 loans, it is possible to take out a debt consolidation loan of £9,000. You can then use the money to pay off the three smaller loans and only have to deal with the larger one. This means that you will only have to repay a single loan, with a single interest rate, instead of several smaller ones.

By merging your debt, you can make it easier to both manage the monthly payments, as well as make your loans more affordable. In most cases, debt consolidation loans will have better interest rates than your existing loans and can help build up your credit score.

Although debt consolidation loans also affect your credit score, they have a smaller impact than other types of debt. In other words, if you have 2 credit cards that you have reached the limit on, a personal loan, and a home equity one, these can lower your credit score considerably. However, if you consolidate your debt, your financial records will show that you have only one active loan, raising your score.

What you should do before taking out a debt consolidation loan?

Debt consolidation loans can help reduce the stress placed on your finances, however, its value turns it into a very serious long-term commitment. Here is what you should do prior to consolidating your debt:

Calculate how much money you are currently spending on your debt:- Look at how much money you are spending on interest each month, including credit cards and lines of credit.
Look at the cost of early repayment for your existing loans:- It is possible for lenders to charge you if you want to repay your loans early. You will have to factor in this cost when deciding if you should consolidate your debt or not.
Calculate how much interest you would pay on a consolidation loan:- Consolidation loans can help you pay off more expensive debt, however, they also come with interest rates. The longer it takes you to repay the money, the more interest you will have to pay, which may lead you back where you started.
Shop around until you find a lender that suits you:- Most banks offer debt consolidation loans, however, if their terms do not suit you, you will be able to find more lenders online. Online lending companies may have slightly higher rates than banks but are more likely to give you a loan, regardless of your credit score.

Conclusion

These are the basics of debt consolidation. If you ever find that you have too much debt to keep track of, or that the total cost of your loans is too high, taking out a debt consolidation loan may be the best course of action. Consider both the risks and benefits, and bring order to your financial life.

What Are The Essential Things That You Must Check Before Applying For A Loan?

Saving up money can be both inefficient and extremely tedious, especially if you do not have the time to properly budget your income. Furthermore, putting large amounts of money aside can take a long time and may, in some cases, cause you to miss important opportunities. This makes taking out loans on of the best ways to pay for home improvements, appliances, cars, vacations, medical procedures, and gifts.

This having been said, loans are not always easy to qualify for, and even if you do, there is no guarantee that the bank will give you a good deal. All lenders look at specific details from your financial record when deciding if you are to be trusted with a loan.

It is also important to keep in mind that although some loans are more dangerous than others, in terms of how their cost can fluctuate over time and what can happen if you do not repay them on time. In order to avoid, or at least mitigate future difficulties, there are several things that you should consider prior to submitting your application for a loan.

1. Is a loan the best option for you?

Term loans are rigid in terms of duration and value. They are great if you need a fixed amount of money that you can then pay, in monthly instalments, over the course of several months or years. However, you will also have to pay interest each month. If you need more flexibility, there are other ways to borrow money, such as a line of credit that allows you to only pay interest for what you use.

2. How much will the monthly repayments be?

Several specialised repayment calculators are available online. These will help you determine how much money you will have to repay each month, for the duration of the loan. Keep in mind that the value of the instalments may change if you get a variable-interest loan.

3. Can you sustain the added financial stress for an extended period of time?

Most loans span over the course of several years, which means that the instalments will dig into your monthly budget for a very long time. While this may not appear to be an issue at first, there is a lot that can happen in 2-3 years. Take into account the possibility that you may lose your job or have to also deal with unexpected expenses. One of the most common developments that most individuals do not take into consideration is the cost of having a child and rising it while still repaying a loan.

4. Is the loan secured or unsecured? What will you offer as collateral?

Think about the risks that are attached to the loan. If it is secured, it means that you will have to offer your property as collateral that the lender can take hold of if you fail to repay the money.

5. What are the fees and charges that you must pay and how much do they add up to?

Not all fees that are associated with a loan are fully disclosed when applying for a loan. Sit down with a bank representative and find out what fees and charges you would have to pay in various cases. Pay special attention to the penalty for early repayment, if any.

6. What is the status of your credit report?

Lastly, check your credit report and consider how your score may affect the terms and conditions that the bank will offer you. Most lenders attach higher interest rates to loans given to those who have low credit scores.

Conclusion

These are the main things to keep in mind before applying for a loan. They will help you make an informed decision and understand what kind of commitment you are getting yourself into. The questions above will also make it easier to evaluate the possibility of failing to repay a loan, along with the penalties or consequences that you would have to bear.

Payday Loans: The Answer to Your Dire Financial Needs

There are times when you get out of cash a week before payday. In these times, when borrowing from relatives and friends is never easy, you might need to find a lender that would allow you to have cash the fastest way, and that would be a payday loan company.
A payday loan is one of the fastest ways of getting cash for your emergency needs. Here are some of the benefits of getting a payday loan.

You can borrow from direct lenders

When you apply for a payday loan, the person or persons who lend the money assesses your application. You do not have to wait for several company officials to approve. The moment the one perusing the application sees that you have the capacity to pay, you can wait for a few hours for your loan to be released.

You can apply for small loan amounts

Unlike in some lending companies where there is a maximum loan amount set, with payday loans, you can borrow for as low as £300 to £400. The lender expects you to pay back the loan during your next payday. Because the amount that you borrowed is minimal, paying back on time is easy, and you do not have to pay more on interest, which can happen when you pay back what you owe in several installments.

You can apply online

One benefit of a payday loan is that you can apply online, which means that you do not have to drive or commute to apply for a loan. Approval is the same day, as well as the release of the loan. You can withdraw it from your account the same day that you applied for the loan.

A low credit score is not a problem

When you apply for a loan, one requirement would be a high credit score. However, although three agencies in the UK can provide individual credit ratings to loan applicants, most banks and lending companies have their way of calculating a person’s credit score. Most payday loan companies do not ask for the applicant’s credit rating when they apply. Because of this, even borrowers that have bad credit can avail of a payday loan.

Payday loans are unsecured

Even if you do not own property or anything of value that the lenders can seize when you cannot pay them back, you can still apply for a payday loan. An essential requirement is that you have a job that pays regularly. The basis of the payment schedule is the borrower’s salary dates because the lenders expect you to pay them back during your paydays.

Borrowing an amount that is more than the minimum loan offer would mean having a more extended repayment period. For instance, some loans are payable in three or four month’s term, making it easy to allocate the amount needed to repay your debt.

You can use the money for any purpose

When you apply for a payday loan, there are no restrictions on how you are going to use the money. However, most borrowers use the proceeds of their loan in paying utility bills, old debts, or in augmenting their budget so that they could survive until the next payday.

The repayment scheme is convenient

The lender can get payments for payday loans directly from the salary of the borrower. The borrower gives the lender the authority to deduct the amount from his or her salary. There is no need to deposit or bring payment for the loan ng payment to the lender’s office personally, which can save you time.

Payday loans can help you resolve unexpected financial problems. As long as you use the money properly, you can benefit from taking a payday loan.

4 Essential Tips That Will Help You Increase Your Chances of Getting a Loan

Applying for a loan is not always as easy as it seems. All lenders look at your financial history in order to determine if you are eligible or not for their services. However, there are other details that establish what interest rates and terms you will be offered. All of these are based on your previous loans, your credit score, and your relationship with the lender.

In other words, if you want to increase your chances of getting a loan and to ensure that you will get a low interest rate, you will have to do a bit of financial housekeeping prior to submitting your application.

There are 4 methods that you can use in order to both increase your chances of getting a loan, as well as make the terms and conditions more favourable. Here is what you need to do:

1. Work towards building up your credit rating

One of the first things that you should always do when considering using the services offered by banks is to build up your credit rating. This score is essentially a track record of your financial decisions and behavior. It is used by lenders in order to establish if you should get a loan or not, and it also plays an important part in deciding what interest rate will be attached to the agreement.

Building up your credit rating takes a long time, however, there are a few things that you can do over the course of a year, in order to increase your chances that you will get a loan and that the terms and conditions will be in your favor.

Consolidate your debt as much as possible, pay off your credit cards, and make sure that you do not miss any monthly payments for the debt that you already have. This will show lenders that you know how to manage your finances and that you can be trusted with a larger loan.

2. Check your credit report and make sure that everything is in order

While it is uncommon for a credit report to contain mistakes, it is not impossible. Always check your credit report prior to submitting your application for a loan and pay special attention that it does not contain mistakes regarding how much credit you are using or your current debt. This having been said, you can request access to your credit report using the website of one of the three credit reference agencies in the UK: Experian, Equifax, or TransUnion.

3. Make sure that the information in your application is correct and accurate

Most lenders look at the information that you provide in your application and verify it. This means that any mistake or inaccuracy contained within can affect your eligibility status and may lead to the lender refusing to give you a loan.

Before submitting your application, take the time to verify its contents. Make sure that it does not contain any spelling mistakes and that the information included in it is correct (check the address, contact information, income, and debt values, etc.)

4. Do not submit too many applications

If you submit a large number of applications in a short amount of time, lenders will conclude that you are unable to manage your finances and may not be willing to give you the loan. Try to space out your loan applications by at least 3-4 months.

Conclusion

These are the basics when it comes to preparing to submit a loan application. Although it may not seem like anything too complicated, a large number of requests are turned down as a result of carelessness. If you want to get a loan, build up your credit rating, check your report for mistakes, ensure that the application is written correctly, and space out your loan requests.