10 Things To Remember When Taking Out Online Loans
Online loans can sometimes be a fiddly and arcane thing to apply for. Many lenders will try to scam you or obfuscate their process so that you don’t apply for the right thing or so that you sign up for something you don’t need. Unscrupulous lenders aside, though, even lenders that are above board can sometimes offer difficult terms and conditions, so we’re here to help guide you through the process and ensure you don’t forget anything important. Here are 10 things to remember when you’re taking out online loans.
1. All lenders are different
While all lenders are bound by certain rules and regulations, outside of those regulations a lender can pretty much do whatever they like. This means that lenders will usually approach loans in different ways, imposing different stipulations and conditions on you. Taking out personal loans from each lender can feel like a vastly different process, so don’t feel like one lender is your only option; if you don’t like what one lender is doing, another will be available to you. That’s why you should…
2. Shop around
You are never beholden to a single lender. You’ve always got the right to shop around and decide what kind of loan is right for you. If you read a lender’s terms and conditions (more on which later) and you don’t feel like they’re advantageous for you, then go somewhere else. Lenders will want your business, so you’re in demand; taking your business elsewhere is something you can always do unless you’ve actually signed a contract, which you shouldn’t do until you’re sure.
3. Your credit score matters
You might hear people talking about your “credit score” when it comes time to apply for a loan. This is a very important figure that could mean the difference between being approved or rejected for a loan, so it pays to know what it is and how to improve it. Your credit score can be checked for free on sites like Experian or Credit Karma, so if anybody offers to charge you to look at it, don’t fall for it, as they are definitely trying to scam you.
4. You might need to improve your credit score
Since your credit score is an important factor in applying for online loans, there’s a chance you might need to improve it before you start your applications. Doing this can be pretty straightforward; did you know, for example, that simply adding yourself to the electoral register can really help with your credit score? It’s basically a figure that tells lenders how trustworthy you are, so making regular bill repayments or paying off any existing debts can also help.
5. Read the terms and conditions
We know that terms and conditions can be labyrinthine and difficult to understand, but they’re often written that way intentionally. The fact is that you should always read the terms and conditions, no matter what you’re applying for, but that goes double when you’re applying for a new loan. You don’t want some arcane part of this document to sneak up on you and slap you with some hitherto-unknown additional charges, after all. Get friends and family to help if you’re struggling!
6. Read your application carefully
Filling out your application very carefully, and reading it to make sure that everything is correct, is extremely important. Sometimes, lenders can actually deny you a loan on the basis that your application has been filled out incorrectly, and this can even go for very minor mistakes like spelling errors. Usually, lenders will contact you to clarify things, but sometimes you can just be rejected out of hand, and this can even have a negative effect on your credit score.
7. Amounts can differ greatly
Don’t think that a loan is wrong for you just because you don’t see the amount that you want to be listed. Another lender might offer more or less depending on what you’re after, and the amount that you can borrow from lenders can differ greatly based on where you go. You can often borrow as little as just £500, and loans can range into the tens of thousands, so whether you need a little to tide you over or a massive amount for a personal project, a loan could be for you.
8. Unsecured vs. secured loans
There are two kinds of loans (in the broadest sense, of course): unsecured loans and secured loans. Which one you want – and which one you’ll be approved for – depends on a number of factors. An unsecured loan is a loan that doesn’t have any kind of asset put up against it, so you don’t need to wager your house or your vehicle against repayments. A secured loan does have an asset against it, but this usually means you can borrow more, so there are pros and cons to both types.
9. Pay off existing loans first
It might sound obvious, but you should try to avoid the trap of borrowing in order to pay off other loans. This can simply trap you in a spiral of debt from which there is no escape. The short-term relief of being able to pay off a loan is quickly replaced by the long-term difficulty of now having another loan to pay off, and you’ll likely turn to a third loan to pay off the second. Think carefully about whether a loan is a right way to approach your financial situation.
10. Rewrite your budget
Once you have applied for an online loan and been accepted, it’s time to rewrite your budget from the ground up. Your circumstances are different now, after all; you’ve got a new expense to worry about, and that needs to have an amount from your income allocated to it. Sit down and carefully rewrite your budget in order to incorporate repayments for your new loan. Make sure you don’t miss anything, as it could come back to haunt you if you do.