If it is the very first time you have decided to apply for a loan or have very little experience in the world of loan products, then you may potentially feel a little overwhelmed. It can be hard to know which loan product to choose, and what may be a better type of loan product to you if you know little about the differences between products.
Making sure that you are completely clued up about the different kinds of loans and the potential advantages and disadvantages of the main categories of lending, is vital before you decide to apply for a loan.
In this guide, we talk about some of the most important points you should take into consideration when you are making an application for a loan.
Consider how you are going to repay your loan
If you are unable to keep up with your repayments for a short term loan, there may be added fees or you will be continued to be charged daily interest if your loan is still outstanding. Therefore, it is always important to think about how you are going to repay your loan, whether it is through savings, income or an upcoming bonus. You should avoid taking on other debts, budget efficiently and manage any other upcoming expenses.
Pick the most convenient repayment date
With many lenders, including The One Stop Money Shop, you can select your repayment date for your collections to come out of your bank account, whether it is the last working day of the month, the last Friday or a specific date e.g 15th or 25th.
Customers will usually choose the day most convenient and when they will receive their income from work, although you may want to give yourself an extra day or choose the last day of the month so you can wait for your income to clear and to re-organise all your finances.
Avoid applying for too many loans
If you are looking to apply for quick loans, you may be tempted to apply for numerous loans on one day or during one sitting. However, you should be aware that applying for too many loans, especially payday loans, can have a negative impact on your credit score and other lenders may treat this with caution if they believe that you are trying to take on too many loan products in a short space of time. This may suggest an urgency for money or even fraud.
Your credit score can determine the loan rate you receive
Another thing that you should keep in mind is that whether you have a good or bad credit score can impact the interest rate you receive for the loan you have applied for, or it could be the difference between being accepted or declined for a loan in the first place.
Alternatively, if you have a poor credit score, but get approved for a loan, it is likely that you will not receive the most favourable rates available for the loan. For example, you may have to pay a higher APR, and may not be able to borrow as much money as you would have if you had a good credit score.
Understand how the representative APR works
An important thing to be aware of when it comes to loans is that you may not necessarily get the rate advertised. This is down to the way the Representative APR works. It means that the lender is only obliged to give the advertised rate to 51% of all successful applicants. In terms of the other 49% who are approved for a loan, the lender is able to decide what will be the APR. See how APR works for more information.