If you want to take out a short-term loan and want to give yourself the best chance of getting one, there are some things that you should keep in mind before you start applying. Here are LoanPrincess’s 10 top tips for taking out a loan, along with why you might consider taking one out and how to do it.
What short terms loans are used for
Most borrowers take out short-term loans and payday loans to cover one-off bills where you don’t have the cash to hand or the savings in the bank. They’re mainly used to cover an urgent bill that wasn’t expected, medical treatment, car repairs, funeral expenses, urgent home improvements, and when an important appliance in your home breaks down.
10 top tips for taking out a loan
Here is a list of things you should be aware of before you decide to apply for a short-term loan:
Be sure why you need the money and how much you need
Short-term loans should not be used to buy gifts, pay for a big night out, or for something else which is something you “want” rather than “need”.
If you haven’t got a fixed amount in mind that you need to borrow, you’ll need to try and work out an exact sum that you need. Short-term loans are an expensive way of borrowing money and if you take out more than you actually need then repaying the loan is harder and you’ll pay more in interest than you need to.
Decide on your repayment terms
When you have decided exactly how much you need to borrow, you should then figure out how you’re going to repay it.
If you can repay your loan in a shorter amount of time, you’ll save money on the amount of interest you’ll have to pay. That said, be realistic and make sure you can afford the monthly repayments. A short-term loan is meant to take away some of the stress you’re feeling and not add to it.
Look up your credit score
If you intend applying for a loan direct though a lender, they will always check your credit score. Every other lender is able to see how many times you have had your credit report checked and by which companies. If there are too many checks for a lender’s liking then your applications may be rejected because it may look like you’re desperate for money – even if you aren’t.
By looking up your credit score beforehand, you will have a better idea of how likely your loan applications are to be approved. Better still, use a broker who doesn’t charge you to make an application. Brokers can match your details up with the types of lenders who want to work with you and this cuts out a lot of time and the risk of multiple rejections.
Improve your credit score
What can you do if you look up your credit score and it isn’t as high as you hoped? Fortunately, there are many ways you can improve your credit score.
To start, you should pay off all of your existing debts if possible. If you can’t pay them all off, try to pay them down faster. This, combined with cancelling any credit cards you don’t use, may give your credit score the boost it needs to get your application approved.
Even doing things like signing up for the electoral roll can improve your score – contact your local council to find out more.
It is very rare that the first lender you go to will offer you the best loan to suit your specific needs. Different lenders cater for different types of borrowers.
The closer your personal situation is to the type of borrower a lend likes to work with, the better. The problem is that most lenders don’t tell you the type of borrowers they like on their website. Short term loan brokers do know what lenders are looking for so you’re likely, in many cases, to find the best deal through them.
Don’t borrow more than you can afford
If you take out a short-term loan and you can’t afford the monthly repayments, you are putting yourself at risk of getting into serious financial trouble. The decision to take out a short-term loan shouldn’t be taken lightly and you should only do it if you are certain you have the means to pay off the loan on time and in full.
It’s worth mentioning that, if your financial situation takes a turn for the worse while you are paying off the loan, you should speak to your loan provider immediately.
You’ll often be able to agree on a new set of repayment terms over a longer period with your lender that gives you more breathing space. Some lenders may charge you for this and others may not.
Consider consolidating your debts
If you have taken out multiple loans in the past and you’re still repaying them, you might want to consider taking out a final loan to pay off all of the other ones if you can find a loan with a cheaper interest rate than the ones you’re paying back now.
Instead of having a handful of payments to meet each month, a consolidation loan will leave you with only one repayment to meet instead.
Debt consolidation can improve your credit score too because your monthly repayments go down and you’re only servicing one account instead of many.
Are you absolutely sure you need a loan?
Cold you approach a friend or a family member for help? Remember that they will probably not charge you interest on any money they lend you and they will be more flexible than a loan company on repayment dates.
Please be careful though. If you borrow money from a friend or a family member and, for whatever reasons, you keep promising to pay them back but you can’t find the money on a particular date, it may put your relationship in jeopardy with them.
Look out for your security
The Financial Conduct Authority (FCA) is the regulatory body which looks after people who take out short-term loans. Each loan broker and direct lender you go to must be authorised by the FCA. Loan Princess and its panel of lenders all have the right licences from the Financial Conduct Authority. If they aren’t licensed, you might be borrowing money from a loan shark.
When you borrow money from an FCA authorised lender, you benefit from strong consumer protection rights. One of these important protections is that you won’t be charged more than 100% in interest and other fees on top of your loan. Other rights you benefit from include a maximum amount of interest chargeable, maximum default fees if you fall behind on repayments, and the right to ask a lender for help if you get into difficulties.
You can check whether a lender is FCA-authorised by checking their website and the Financial Services Register.
Use a broker
Loan brokers only need to carry out one credit check on your application and they will share that credit check with their panel of lenders in addition to the information you provide on your application.
There are two advantages to this. First, no multiple credit checks against your name which puts lenders off and, second, your broker matches you up with the right lenders taking the guesswork out of applying for you.
What you need to know about making a loan application through Loan Princess
At LoanPrincess, it’s our job to find you the loan that suits your needs at the lowest price possible.
We do this by taking your information (how much you want to borrow, your credit score, your loan history and so on) and then we send your information directly to our network of lenders. Our lenders then decide whether or not they want to work with you.
Almost straight away, we’ll know the lenders who are happy to offer you a loan. They come back and tell us what they’re willing to lend you and at what interest rate. Each lender can then see every other lender’s offer and they then start competing for your business. One lender will say that “we’re happy to lend you money at this interest rate” and another responds to say that “we can’t beat that.”
This entire process is done automatically and in real-time and it delivers you the cheapest deal on your loan.
To start your application, please click here.