Applying for a loan is probably everyone’s first thought when they lack money. However, while applying for one may be easy, getting the approval for a loan takes certain conditions. This is especially true in the recent years, since the global economic crisis has affected almost every country in the world. Nevertheless, getting a loan from the bank may be the only option for some people, so it’s important they know the basics before they decide to apply for the loan.
Credit Card as an Alternative
A personal loan is not the only form of credit. You can also consider getting a credit card, instead of applying for a loan. This is the cheap alternative, since it offers a 0 percent introductory offer on purchases. However, this can be a tricky payment method for those who enjoy shopping and don’t think much about the debt they’re making. Additionally, a long term loan is better option if you won’t be able to pay the credit card debt in time.
Interest Rate and APR
Interest rate and annual percentage rate can vary a lot, depending on your lender and your credit profile. If you have a good credit rating, a credit union or a bank you turned to for a loan will provide you with a very low interest. If, on the other hand, you ask a conventional finance company for a loan and your credit rating is poor, the interest rate will be higher than the one on the credit card. However, a huge advantage of conventional personal loan is that it’s not revolving credit, but installment based. This means that if you get an installment loan, the loan will reduce as you pay off each month.
Good Credit Score
When you decide to apply for a loan, the lender will most likely base their decision on your credit rating. It’s imperative that the credit score is flawless, and that you’re not already in debt to some other lender, or you’ll get a bad deal. What’s more, in some cases your load will be denied. If you ever get into trouble with credit rating, companies like Clean Credit can help you get a clean slate and have a piece of mind when it comes to your money.
Even though you’re applying for a long term loan so that you can pay it off gradually, it’s possible that you’ll want to repay it earlier. However, this action will cost you, believe it or not. Many lenders will put a clause that says how much more money you’ll have to return in order to fully pay off the loan ahead time. Therefore, read the contract carefully, before you decide to take this step.
Payment Protection Insurance
If you’re unable to meet the repayments every month, payment protection insurance will be there to cover them. You might have a family emergency, like unemployment, sickness or an accident and so you won’t be able to repay the loan for that month. Therefore, search for the best deal and make sure you pay the loan regularly, one way, or the other. However, PPI isn’t mandatory, so if you don’t think you need to have one, don’t apply for it.
If you ever decide to apply for a loan, make sure you check the previous information in order to get the best possible deal. It’s important that you have a good credit rating, so that you can get a loan, and repay it on time. Make sure you are familiar with the basics of applying for a credit, so that you don’t end up with a too high repayment amount. Knowledge is power, so use it to your advantage.