When looking for a loan, it’s important to weigh up a number of factors in order to decide which is right for you. There are some key issues to consider, from the size of the loan and the duration of repayments, through to the level of risk associated with the loan, and your past credit history. Perhaps the most important area to focus on is whether you can realistically make the repayments on the loan, and whether or not you can increase your eligibility if you have been refused for certain loans in the past.
1 - Size of the Loan Needed
Larger loans that are taken out to finance a house or car payment are typically taken out on a secured loan basis. A secured loan is one where the asset in question becomes collateral for the lender. A house’s value is used to secure the principle of a loan, and is then repaid over time with interest. The benefits of this kind of secured loan include being able to arrange for longer repayments to be made on lower, or fixed rate interest rates. Lenders are more likely to offer these conditions if they have the option of recovering debt through an asset.
By contrast, for a smaller personal loan, you may have to take out an unsecured loan. These loans have shorter repayment schedules, and higher, or variable, rates of interest. However, a short term personal loan can be a better option if you know that you can make the repayments without defaulting.
2 - Repayments
Always think carefully about your current and future financial situation before you take out any kind of loan. You need to be able to repay a loan consistently, so think about the deductions that will need to be made from your wages, as well as how far interest payments may rise. In terms of a secured loan repayment schedule, see more information at GBP secured loans, you are also committing to a single piece of a property, albeit with the knowledge that you can resell your equity if you decide to move. Moreover, in the case of a short term personal loan, remember that you can be hit with very high interest rates if you default. This is particularly the case with payday loans, where a monthly loan can lead to APR levels of 4000 or more.
3 - Level of Risk
All loans involve a certain level of risk, both for you and the lender. This risk can range from whether you can efficiently meet credit card repayments, as well as whether or not you are prepared to offer up an important asset in exchange for a secured loan. Discuss this risk with your bank, and inform a lender if you feel that you are unable to meet the terms of a repayment schedule.
4 - Credit History Score
Your credit history score will affect which loan is right for you. While a good or bad credit history is not always the deciding factor in whether a lender makes a loan, it can be an important way of deciding whether you can be trusted. In this context, you may be refused for a personal loan if you have a poor credit history, and might have to consider other options that take on more risk, such as a payday loan. Again, what loan is right for you comes down to your profile and future potential for repayment as a borrower.
5 - Other Options to Consider
When considering a loan, it’s worth thinking about how you make things easier for yourself in terms of your credit history and eligibility for secured loans. One of the options available to you is to take on a guarantor loan, whereby a third party acts as security for the loan, using their own property as collateral. Doing so can mean that you can gain a loan at a lower rate of interest, and can rebuild your credit history if it has suffered in the past. Moreover, it’s possible to increase your eligibility for a low interest loan by checking your credit history for any inaccuracies that might be unfairly affecting your profile.
Author Bio: Liam Ohm is a finance blogger and after trawling through hundreds of loan websites, he can happily recommend secured loan from GBP Loans. In his spare time he enjoys travelling and making worthy investments.
I'm Louida from Atlanta, Georgia and I'm a mother of two daughters, and a full-time blogger/influencer.
I love helping others learn how to start working from home online free to help supplement their current income.
I also blog at Productreviewmom.com
Subscribe to newsletter
Grab my Badge