Taking out a personal loan can seem daunting at first but, if you do your research, take your time and consider some key points first, you can make the process smooth and stress-free. We’ve compiled some top tips for ensuring you choose the loan that’s right for you, so take a look and be sure to come back to them before you hit ‘apply’.
Be sure you really need one
This might sound like common sense rather than a top tip, but you might be surprised at how many people take out a personal loan when there could be alternative solutions. A loan is a big and often long-term commitment, so you need to be sure that you need it and can afford it both now and in the future. If you are considering a loan for consolidation purposes, you might be able to reduce your monthly payments on other credit accounts, to ease your financial burden without taking out a whole new agreement.
See what previous customers have said
If you’ve drawn up a shortlist of potential lenders that you’d like to look into further, always make time to review customer feedback. Businesses can talk a good game about the benefits they offer and their customer service standards, but nothing gives you as much insight as the experiences of confirmed buyers. Make sure you pay particular attention to response times and how issues or disputes are handled.
Don’t be fooled by attractive APR deals
A key selling point for any personal loan is a low rate of interest and, while some companies advertise very low percentages, be aware that these are only usually offered to potential customers with perfect credit scores. You’ll notice that the advertised rates will be labelled as ‘representative’, which is what this refers to. If you have a less-than-ideal credit rating, your offered APR could be dramatically different once you’re accepted, meaning that you’ll pay back far more by the end of your loan term.
Prepare for the impact on your credit score
When you allow companies to check your eligibility for a loan product that they offer, your credit score could be affected, depending on whether a soft or hard search is carried out. These searches can get logged on your account and potentially have a negative impact if you carry out too many in a short period of time, resulting in the possibility of you being refused for the loan you finally decide on.
Find the flexibility that you need
Do you think you might be able to make extra repayments or pay your loan off entirely sooner than your agreement term? If so, you need to focus on finding a lender that won’t penalise you for doing so. You might have a bigger APR with them, but if you can pay off early with no fee, the cost should land in your favour. Likewise, if you know that you’ll never be able to make extra payments and you need as long as possible to pay back your loan, you can ignore no fee benefits and hone in on those that offer the lowest monthly repayment amounts.
Use comparison sites
It’s not cheating to use a comparison site to give you an overview of which loans could be most suitable for you, but always double-check that the rates you can get aren’t better if you go directly to the provider through their own website. It’s all too easy to click ‘apply’ just because you are already at the point of application submission, but give yourself a few extra minutes, just in case you can save some extra money.
Taking out the right loan is simply a case of being methodical and pragmatic in terms of considering all your options, so pop the kettle on and don’t rush the process.