Before you get a loan, what do you need to consider? It’s a big decision and any loan you take out has got to be right for you.
In an ideal world, we’d all be paid enough so that we could enjoy life to the fullest and put money to one side.
It’s only fair. We work hard for our money and we want a nice life.
As you might have seen in the news in recent days, it’s 10 years since the start of the credit crunch. In that time, when you add in inflation and other things, every man and woman is earning £15 per week less on average than we did back in 2007.
Since 2007, gas and electricity bills have gone through the roof, just like council tax. Day to day, everything is just more expensive.
So, if you’re landed with an unexpected bill or expense and you don’t have the cash to cover it now, you will need financial help. If friends and family can’t assist you, you might benefit from a loan.
If you need to find between £80 and £2,000, that’s too small a sum for many banks and building societies – they like to lend a lot bigger.
There are lots of short-term credit companies out there so if a loan is what you chose to get yourself over this hump, what do you need to consider before you take it out?
Before you get a loan, know for sure the amount you need
Sit down and carefully think how much money you need. Try to come up with an exact figure.
This is important because it’s not going to solve your problem if you apply for short-term finance and receive the money only to find out that you’re not going to be able to meet the unexpected bill and the expenses that might go around it.
Remember, you’re taking this money short-term to relieve the stress on you. If you take out a loan only to find out it wasn’t enough, that’s not going to take away any stress – it’s only going to add to it.
In addition, while a lot of short-term lenders will allow you to top up your loans, you normally have to wait until you have paid off half the amount that you originally borrowed. If you need that extra money now, you may have some way to go before you qualify for a top up.
Before you get a loan, know how much you can afford to pay back each month
This is also something you need to take very seriously.
Be honest with yourself because being honest will save you from a lot of worries. Can you imagine how you’d feel if, after taking out the loan and working out your finances again, you realised that you’d be £20 or £50 short each month and you couldn’t make the repayments?
Please make absolutely sure you structure your loan so that you don’t find yourself in this position.
Before you get a loan, understand the risks
Many payday loan providers and short-term credit providers have a really open mind when it comes to who they’ll lend money to. They don’t mind if you’ve experienced a bit of financial trouble in the not-too-distant past – they’re more bothered about who you are now.
That said, they’re as keen to be repaid as every other lender.
If you don’t make repayments on your short-term loan on time and in full, you can normally approach the lender and get some help (sometimes it might cost you up to £15 in a default fee though).
But, if you agree to an extension or alteration to your repayment schedule with your lender and you miss another repayment, it could do a lot of harm to your credit rating.
Before you get a loan, make sure you borrow from a registered lender
A few years ago, there were a lot of people who were concerned about some of the charges and working practices used by payday lenders and short-term credit providers.
We at CashLady shared those concerns. We’ve always been very selective about who we’ll introduce our customers to.
The Financial Conduct Authority ran a series of hard-to-pass and very vigorous tests on payday loan providers and short-term loan companies back in 2016. Many providers dropped out – the tests were too difficult to pass. The reputable ones remained. (PS Did you know that CashLady is also authorised by the Financial Conduct Authority?).
Lenders providing payday or short-term financing have to follow these rules –
- Interest rates at no more than 0.8% a day
- Default fees cannot be charged at more than £15. If a borrower defaults, the lender can continue to charge interest but at no more than the rate they agreed to charge when the borrower took out the loan
- The total amount of fees and interest you pay can never be bigger than the loan. So, if you take out £100, your lender should not charge you more than £100 in fees or interest.
Protect yourself. Choose a Financial Conduct Authority-registered lender or broker. Any lender not registered with the Financial Conduct Authority is operating illegally.
Before you get a loan, choose whether you apply direct to a lender or go through a broker
If you apply for a payday loan or short-term credit, you can either apply directly to the lenders themselves or via a broker like CashLady.
If you go directly to a lender, you don’t know before you apply whether you fit that lender’s “profile”. A “profile”, in the finance world, is the type of person a lender likes to make loans to.
CashLady works with 15 different loan providers and we know each lender’s profile preferences. You could save a lot of time by using a service like ours and it won’t cost any more than if you went directly to the lender.
If you wish to apply for a payday or short-term loan now, click here to do it through CashLady.