Sometimes in life, you have no choice but to take out a loan for your home, bills, or your family. It can feel like a massive blow to your ego and it is something none of us ever want to do.
If you are in need of payday loans for your family and to get you through the week. It is important that you do your research and pick only the right ones for you. Some lenders can be a little dodgy in their methods and this can leave you with a huge pile of debt to wade through at the end of it all. Here are some of the main pitfalls you need to avoid when taking out a loan.
Be wary of the credit search
When you apply for a loan with a lender, you will have to go through a vetting process to make sure that your credit score is good enough and that you can be trusted to pay the money back after the agreed term. If you find yourself being rejected by a few lenders, their search results will come up on your credit record and this can give future lenders a bad impression of you. However, if you can find lenders who let you make an informal inquiry with a soft search, it won’t show up and it means you get an answer without it going on your record for all to see.
Look out for extra charges
There will sometimes be small stipulations in your loan agreement which give you extra charges to pay back alongside your loan and interest. This could be anything from admin fees to early repayment charges, and it is crucial that you take the time to look through your contract and read all of the small print presented to you. Repaying early is always something you will want to aim for so make sure you find a lender who won’t charge you for doing it.
Interest rate traps
Marketing campaigns for loan companies will always advertise the best case scenario with interest rates. When a company advertises a certain interest rate, they advertise it as being representative. However, representative just means that the majority of people are paying this rate, so there is no guarantee that you will qualify for the low rate. A representative figure can mean as low as 51% so be aware of falling into this trap when you are looking for a loan.
More can cost less
When you take out a loan, you may actually be better off taking out a bigger loan than you need because the loan will cost you the same to take out. The reason for this is that no matter how much the loan is worth, the admin fees at the firm will still be the same, therefore your admin costs will still be the same even if you take out double what you originally need.
If you take on all of these tips the next time you look for a loan, you are much less likely to fall victim to the pitfalls of borrowing money.