Personal loans can be used for multiple purposes, including purchasing large items, educational materials, household repairs, or even a big event such as a wedding. Whatever the reason, taking out a personal loan is a big decision.
There are many factors to consider before you apply and take out credit. We’ll discuss how to prepare for taking out a personal loan and the questions around making the repayments.
Before you apply
Before taking out your loan, you should be aware of a few important elements. You should make sure that your lender is registered with the Financial Conduct Authority and check the following:
- Interest rates – You’ll pay interest on the amount you borrow, so it’s vital to know what rate this will be charged at. This is usually above the standard current bank rate.
- Repayment term – This is the period of time over which you agree to borrow. It’s usually in the range of one to three years but can sometimes be longer, depending on your circumstances.
- Fees – Some lenders will charge a fee for taking out one of their products or for repaying your loan early. It’s best to check this before signing up to anything.
- Unsecured or secured – Most personal loans are unsecured, meaning you won’t need to back up your credit with collateral, such as your home. However, if you’re borrowing a large amount, some lenders might offer secured loans. https://www.google.fm/url?q=https%3A%2F%2Finfochanel.com%2F
You should also be aware of your credit score and any issues that might affect taking out a loan. There are bad credit loans available for those who may have a poor credit score. Just remember to check whether you can afford the repayments if you’re taking out this type of loan.
Making your repayments
Your lender will expect you to make your repayments on time each month, and there may be a penalty involved if you fail to keep up with them, such as extra charges.
Missing payments can leave a negative mark on your credit score. If you struggle with your loan repayments, it’s crucial that you contact your loan provider in the first instance. They might be able to help by extending your loan period and allowing you to pay less each month.
Cancelling your loan
Whilst it can be difficult to cancel or get out of a loan once you’ve signed a contract, there should be a cooling-off period of 14 days to allow you to cancel the agreement. This is included in the Consumer Credit Act and a lender will legally have to let you withdraw from the loan if requested.
Repaying early could incur charges but you shouldn’t usually have to pay any interest that would have accumulated after this point. https://www.google.fi/url?sa=t&url=https%3A%2F%2Finfochanel.com/