You may be planning on starting a business, getting higher education, buying a house, or there might be other reasons you are considering taking a loan. Hundreds of thousands of people in the UK borrow money in the form of loans each year. Though loans are straightforward to acquire, there are certain things that you should know if you want to get a loan.
The amount of money you want to borrow will depend upon several things, such as your credit score. The loan company determines how much money you can repay and decides to lend the sum to you accordingly. Usually, you can get loans ranging from £1,000 to £35,000. The terms of the loan may differ for several types of loans. But commonly, the terms range from 1 to 7 years.
Take time to consider several things, such as how much money you can borrow easily, the instalment amount that you can quickly repay and the length of the term.
Things to Consider when getting a loan
Who can get a loan
There are only some basic qualifications for getting a loan in the UK. For starters, if you are under 18 years of age, you may likely not qualify for a loan. You also have to be a resident of the United Kingdom. Usually, you need to have a current account with your lender too.
Meeting the Basic Criterion
If you meet all the above-mentioned requirements, lenders will have a look at your credit history and current financial condition. They will then decide whether to lend to you or not. If you have a good credit score, you will face no problem in getting a loan. It is proof that you will be able to make your monthly payments in time and can be trusted with the loan.
But if this is not the case, the lender may reject your application or may charge you higher interest rates.
Naturally, the amount of money that can be borrowed under unsecured loans ranges from £1,000 to £35,000. Again, this will be determined by your credit score in light of how much money you can repay easily.
The term of Loan
The term refers to how long you can borrow the money for. Different types of loans offer varying terms. Terms can be chosen by you or can be determined by your lender. Usually, for a personal loan, the duration ranges from 1 to 7 years. While getting a loan for a longer term will mean smaller monthly instalments. But this will result in higher interest rates being added each year. So, you will end up paying a much higher amount overall.
What can You borrow for?
You can use a personal loan for almost any purpose, such as buying a car, consolidating your existing borrowings, paying off debts and much more. When looking for a loan, make sure your prefered company offers a loan for the purpose you need.
Improve your credit Rating to Borrow Better Loans
Before you apply for a loan, it is advisable that you improve your credit scores to get a better deal. This way, there is a good chance that your loan application will not be rejected. You will also be able to obtain the sum without a very high-interest rate. You can improve your credit score by making sure your monthly payments/ taxes are made in time. Make sure that you are on an electoral roll. Because lenders often rely on electoral registers to confirm your identity. Building up your credit history is a rational choice as well. It will let the creditors make an informed decision about the money they plan to lend you. Applying for too many loans leaves a footprint on your credit history. When this is the case, the lender may refuse to give you a loan.
There are several types of loans that you can acquire, depending upon your requirements:
Unsecured Personal Loans
They are best for personal expenses such as weddings, major purchases or consolidating debt. Unsecured loans mean that nothing has to be put as collateral at the time of receiving the loan.
Secured Personal Loans
They have lower interest rates. And since they are secured, you need to put your car, home, or any other valuable asset as collateral.
These are short term loans. The amount borrowed is due till your next payday. They are the best option in case of an emergency situation but have very high-interest rates. Find the best Payday loan companies in the UK.
Title loans are such as car title loans, allowing you to borrow money between 25 to 50% of your car’s worth. The repayment has to be made in 15 to 30 days, or else you could risk losing possession of your vehicle.
Credit Card Cash Advances
You can get a credit cash advance loan on your credit card. It is a short-term loan that is borrowed against your current balance.