Have you ever considered the consequences of applying for a personal loan?
Whilst it’s it’s fairly easy to apply for a loan and get the money paid out quickly, it can affect your personal financial situation in a number of ways.
For instance the lender who grants you a loan may not be registered with the NCR and may charge exhorbitant interest rates combined with stringent repayment terms.
These 5 tips could help you save loads of money on your total loan repayment amount.
1. High Interest Rates
Personal loans are generally unsecured and come with relatively high interest rates.
An unsecured loan doesn’t require any security or collateral and is therefore considered “high risk” by the lender.
Therefore the lender will seek to offset the risk by charging a high interest rate which translates into higher repayments.
This means that you may end up paying way more for your personal loan, in interest & fees, than the principal amount.
It’s also very important to check what the penalties would be if you miss a payment. This amount could vary from one lender to another.
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2. Credit Rating
Due to the high risk nature of the loan, the main stream lenders will only grant unsecured personal loans to applicants with an acceptable credit score.
Furthermore, if you have a poor credit rating and your loan application is declined, your credit score may be damaged even further.
It’s also a good idea to check your credit rating before applying for your loan.
You’re entitled to a free credit check once a year through one of the credit bureaus like Experian.
Furthermore, if it’s poor, you can improve your credit score with these tips.
3. Loan Sharks
What do most consumers do when their loan applications have been declined by the mainstream banks?
They resort to disreputable lenders who are only to keen to grant credit to applicants with bad credit.
You might ask what the problem is with that?
Well lenders who aren’t registered with the NCR generally aren’t worried about conforming with the NCA (National Credit Act) and therefore place onerous requirements on desperate consumers.
These kind of lenders are also referred to as loan sharks who can make your life a living hell if you don’t make your repayments on time.
You are well advised to avoid these lenders at all costs no matter how desperate you are.
In fact, if you are desperate for money this is the last place you should consider as your financial situation probably won’t allow you to make the payments which will only make things worse for you.
4. Save By Borrowing More
5. Shop Around For Your Loan
It’s important to examine all the costs that would apply to your personal loan.
Whilst on the face of it, various lenders may appear to offer the same deals, but after scrutinising them they could vary significantly.
Therefore be aware of the actual cost of a loan by taking into account the interest payable as well as all other fees.
So when certain banks advertise preferential rates to their regular customers, it’s advisable to shop around for more affordable loans that could be available elsewhere.
So while it takes a bit of extra effort comparing various deals, it could save you loads of money.
Last Word On Applying For a Personal Loan
Notwithstanding the above, remember that if you have never been declined for a loan or credit by a mainstream bank, you could be considered as a low risk client.
Use this to you advantage to secure the most favourable interest rate & lowest fees before signing for your loan.
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