4 Important Things to Consider before Taking a Loan
There are many events in life when we need additional money other than we already have. The concept of loans has arisen from this very fact. However, before taking such a loan, everyone should first think on various matters because taking a loan is quite a big decision. Here are things you should consider before taking a loan.
1. Secured of Unsecured
Personal loans or unsecured UK loans usually enable you to borrow up to £25,000 or sometimes even more. The borrower is not at a very big risk with personal unsecured loans like with a secured or second charge mortgage. However, default in repayment can damage your credit rating and getting credit in the future can become tough and expensive.
If you are planning to borrow an amount more than £25,000, most lenders will ask for security like property. In other words, you will have to take a secured loan. If you don’t have a property or equity in property, you have to take an unsecured loan only.
Be careful about secured loan. In the event of default in repayment, the lender can apply for repossession of property so as to get their money back.
2. Interest Rate
The rate of interest on a loan is quoted as an Annual Percentage Rate (APR) in advertisement and on your credit agreement. There will be a range of APRs for various tiers of loans, but the lowest rates are usually for higher to mid-range amounts. Ads of loans including that of personal loans should quote a Representative APR which has to apply to minimum 51% of people who opt for the loan due the ad. The APR offered to you actually will be based on your personal situation. The more your ‘creditworthiness’, the lower will be the rate offered to you.
3. Monthly Repayments
It’s quite obvious that you first should make sure if you can make payments every month. Unsecured loans work on a fixed rate basis; hence you know what repayments you’ll have to make across the loan term. Secured loans typically have a variable interest rate; so, make sure you can withstand any change in the interest rate on both, first and second charge mortgages.
4. Use a Calculator
It’s a good idea to calculate and compare what monthly and total repayments you’ll have to make and how much you pay in credit after repaying the loan. For this, you should use one of the online calculators which are easy to use. You can calculate your repayment for different loans and compare them so as to find the best option for you.
Consider all these things so as to choose the best option, if at all you have to take a loan. Choose a loan that won’t be hard on you and you’ll be comfortable throughout the loan term.