STIC Money – Financial information and loan guides.

The Right Loan

Choosing a good loan to use is important. Some loans are well-suited for certain purchases or financial needs. Financing options such as mortgage and car loans are specifically designed for those purchases, so you know they are the right financing option to use when you want to buy a car or a property.

Other loans are not so obvious. Personal loans, for example, are designed for a wide range of purposes. You can use it for funding a new business or renovating your house just as easily. You can also take out a personal loan to deal with an emergency.

In the case of personal loans, you need to review your needs and search for options that suit you best. If you need a quick loan for one or two weeks, applying for a large personal loan is not the way to go. If you want to keep the monthly repayment amount affordable, on the other hand, there are loans that can be extended to up to five years.

Don’t forget to compare the available loans based on the cost of using them. You can either review the total repayment amount or use the loans’ APRs as your benchmark. Spotting the most affordable loan to use should not be difficult now that you have web tools and additional resources to help you.

The Right Lender

Choosing a good loan is important, but you also have to make sure that the loan comes from a reputable lender. Good lenders such as Emu.co.uk will work with you until you completely repay the loan; shady ones aim to keep – or even extend – the debt, making it more difficult to repay the loan in full.

There are some signs to look for before applying for a loan. For starters, you need to make sure that the lender is licensed and regulated. You also want to check the financial products they have in store and the operation of the company as a whole.

Next, review testimonials from past borrowers. You now have the internet on your side when it comes to finding information about potential lenders. User reviews and testimonials, along with independent reviews by financial experts, are very easy to find.

Lastly, make sure you review the terms and conditions of the loan carefully. Don’t hesitate to ask questions or consult the lender directly. In some cases, you can even negotiate a better term and get your interest rate reduced in the process.

The Right Time

Of course, the most important part of the equation is responsible borrowing. In order to fully benefit from the available financing options, you need to understand how to use them to your advantage. Applying for every loan you come across is certainly not the way to go. Borrowing more than you really need is not something you want to do either.

Before searching for a loan to take out, take the time to fully understand your needs and requirements. How much do you really need? What is the money for? What is your plan for repaying the loan? Is the expense something you can postpone or is it an urgent matter?

The more you understand your specific needs, the better you will be at finding loans and financing options that suit you. You can also conduct the search with a clear budget – how much you can afford to spend on repaying the loan – in mind, giving you even more control over the whole process.

That last part is actually important. The last thing you want to do is using a loan only to struggle repaying the loan in the future. Rather than getting sucked into this cycle, take the necessary steps to cut expenses and raise more money to afford the loan before applying for it. Small changes go a long way.

By getting these three elements right from the beginning, loans are not something to be afraid of. They work really well as leverage; proper use of loans can help you reach new heights with your personal finance. The growing number of financing options available make using loans to your advantage even easier.

Personal loans have gotten more flexible over the years. You can borrow more money by taking out a personal loan. You also have more flexibility when it comes to the terms of the loan; it is even possible to negotiate a loan agreement that suits you best. On top of all that, you have more personal loans to choose from.

Still, personal loans are only valuable to your personal financial state when you use them properly. There are a few things to consider when choosing a personal loan to take out, including the cost of the loan and its payment term. To help you make the most out of your next personal loan, here are the tips you can’t afford to miss.

Shop Around

Shopping around for deals and loan offers is a must. It is no longer a hassle now that you have web aggregation tools and other resources helping you get quotes from multiple lenders. There are even apps that will match your credit history with the most suitable personal loan to take out.

It takes no more than five minutes to find the best personal loan deals on the market. After filling out a simple search form, you can start comparing the personal loans you have access to and settle for nothing but the best one according to your specific needs and requirements.

Set the Principal Amount

The best way to go is borrowing only the amount of money you need. I know how tempting it is to borrow more just because you can, but you will end up paying more on interest and other charges when you do. Sticking with the bare minimum is how to get the most value out of the loan.

Borrowing more than what you really need also puts more pressure on your personal finance. When you do run into issues repaying the loan, it will also hurt your credit history badly. Why take the extra risk when you can have the money you need within a couple of hours?

Review Your Credit History

Speaking of credit history, it is also a good idea to do a quick review of your latest credit score and history before applying for a personal loan. Many mistakenly believe that credit history is only taken into account when applying for larger loans such as a mortgage. That is not the case.

Lenders will still review your credit history when reviewing your personal loan application. The cost of using the loan is determined by the state of your credit. If you have inaccuracies in your credit history, take steps to correct them before applying for the personal loan to get the best deal.

Check the Interest

There are two things you want to understand about the interest on your personal loan: the rate and the way it is calculated. Interest rate is fairly straightforward. You get a percentage added on top of the principal amount as the cost of using the loan.

The way interest rate is calculated, on the other hand, is often neglected. Even with the same interest rate, a personal loan with daily-compounded interest will still cost more than one with an annually-compounded interest rate.

Beware of Origination Fee…

Some lenders charge an upfront fee for providing you with the loan. A 1% fee on a £10,000 loan means you only receive £9,900 when the loan is cleared. There are different names for this fee, but it is basically origination fee.

This fee actually affects how valuable the loan is. A fee of 5% may seem small but having that 5% deducted from the loan upfront is actually costly in the long run. You still pay interest on the full principal amount, which means the total cost of the loan is much higher than you realize.

Fortunately, many lenders now offer 0% origination fee as a way to make their personal loans more valuable. At the very least, you want a personal loan with the smallest origination fee possible in order to benefit more from the financing options.

…and Prepayment Penalty

Another fee to check before applying for a personal loan is prepayment fee. As the name suggests, prepayment fee is a fee that you pay for settling the loan early. This is a fee you want to avoid as much as possible, since it makes repaying the loan early – and saving on interest – more difficult.

You can also go a step further and ask questions about how interest and other fees are calculated when you do decide to settle the loan early. Having the flexibility of prepayment is a huge benefit, since you can allocate unexpected income and bonuses towards clearing the loan faster.

These are some of the tips you don’t want to miss if you want to benefit more from using personal loans. There are still so many things you can do to save on your next loan, so stay tuned for more articles!

The Right Loan, from the Right Lender, at the Right Time