Monday, 3 March 2014

Ten Tips For Choosing A Short Term Loan

Ten tips for choosing a short term loan

If you’re strapped for cash, then it can be tempting to throw caution to the wind and borrow money from the first lender who comes along. However, it’s worth bearing in mind that short term lenders vary hugely, and so does the cost of the loan. So before committing to a loan, follow these ten top tips to make sure you’re not selling yourself short.

Do You Need to Borrow?

Remember that borrowing is a financial commitment, so only take out a loan if you have no other option.

Check your credit score

Before going ahead and contacting any lenders, always be sure to check your credit score first. You credit score will affect the cost of borrowing, and as many banks will not lend to those with bad credit, so you’re options will be more limited and you’ll be paying a higher rate of interest for borrowing.

Credit Applications

You should never make multiple applications for credit as this can damage your credit score. Instead, take time to find a suitable lender and stagger any applications you make.

Interest Rates

Once you have established how lenders will view any applications you make for credit, you’ll have more of an idea of who to approach for a loan. If you have poor credit, short term lenders such as payday lenders will charge higher rates of interest, but are likely to be your best option.

Understand APR

No one wants to spend time trying to understand the complexities of interest rates, but the APR (Annual Percentage Rate) is an important factor when considering a loan. The APR explains the total amount a loan will cost you over a period of one year and includes fees. Some lenders advertise what they term as a ‘typical APR’ but this doesn’t mean you will be charged the rate quoted. So always check for the ‘actual’ APR rate with a lender, before agreeing to a loan.

Understand APR and Short Term Loans

Because it’s an annual figure, APR is often a poor way of calculating the cost of a short term loan. Instead, look at how much interest is charged per day, or per every £100 borrowed. You should be paying something in the region of £30 for every £100 borrowed.

Hidden Fees

Always establish what types of fee you will be charged, and whether this is included in the cost of the loan or is payable upfront.

Lenders to Avoid

Always steer clear of lenders who pressurise you to take out loans, and who do not make responsible enquiries as to your financial situation.

Consider the Repayments

Before taking out any type of loan, always ask yourself if you can repay it. Fail to repay in time, and you will build up the costs of the loan and could find yourself with debt problems.

Early Repayment Fees

Always check to see if you’re able to repay a loan before the end of the term to save costs, but check that you don’t have to pay a fee for this.

Wendy Lin is a successful female entrepreneur. Her passions and work include private business consultancy, writing, and watercolour painting.

Related Posts

What Doesn't affect your credit score
Easy way to improve your credit score

No comments :

Post a Comment