Availing of a loan can give you peace of mind when other ways are closed. Its significance can be witnessed when someone explores the UK marketplace. The loan market there is so huge that one can find plenty of funding options to consider. Everyone can opt for any loan depending upon their situation and financial capacity.
Moreover, a person usually applies for a loan in two conditions:-
First, when there is a financial desire, such as buying a car, home, a laptop, opening up a new business, and many more.
Second, when there is a financial need like an urgent medical bill, filling the funding gap during a large purchase, and helping a friend during urgency.
In both situations, loans can be an effective option. However, do you think it is too easy to obtain a loan? If yes, then it is a myth.
Some efforts are needed when opting for a lending product. You cannot qualify straightway. Instead, there are a few conditions to fulfil. Similarly, the terms and conditions have to be followed, and you should own the capacity to repay the loan.
Confusion in your mind must be there. As a result, on behalf of LoansForever, I have summed up a few questions and their relevant answers, which you should go through before stepping forward towards a loan.
6 questions to ask before applying for a loan
This blog is a proper solution if you need help obtaining a loan. These questions may be general but belong to every loan aspirant. Therefore, let us start now.
Question #1: How much can I borrow?
Deciding the borrowing amount looks easier to read but is difficult to decide. Believe me, it is significant as it directs the loan terms and conditions. You may need £1000 while another borrower requires £10000. Therefore, the loan norms get changed for both borrowers. Similarly, you have your capacity, while other individuals have their own.
The primary thing is that finalising the loan amount needs special attention. Here are a few suggestions for you:
- Before deciding on the loan amount, analyse your current financial situation. Suppose you have an urgent bill to pay but struggling for additional funds. It is why you need a loan. Now, borrow only that amount necessary for that bill payment only.
- Consult with your friends or family members who have already availed of a loan. They can better guide you in choosing the right amount without putting extra pressure on your monthly income.
- Evaluate your affordability by budgeting around the loan monthly instalments and regular monthly expenses. It will help you a lot, and you want to borrow only that amount, which is repayable from your earning.
Follow the things mentioned above and decide the appropriate loan amount.
Question #2: How do I qualify for loans?
The next question is related to the loan qualification. Remember that “LOANS ARE FOR EVERYONE, BUT NOT EVERYONE QUALIFIES FOR A LOAN”. It largely depends upon the lending company you have chosen and what conditions it will be put in. Some general ones are:
- You should have come of age, as individuals between 18 and 65 are usually eligible for a loan. It may include everyone, from students to retired people.
- Your active financial profile determines your loan eligibility. Therefore, you should have a valid bank account and be ready with its statements while applying.
- Your credibility also matters a lot, and your genuine contact details are the criterion of it. Lenders prefer to have your valid mail id, contact address and active contact number. However, you need to research well on the lender before sharing these personal details.
- Your income leaves the most important impression on the lender. The companies generally like those individuals who are earning full-time income.
Apart from these, lenders may have their specific eligibility criteria, which you have to fulfil.
Question #3: Where to apply for a loan?
You can approach traditional lenders like banks or modern-day online lenders to get a loan when needed. Both are good options, and banks are more trustworthy as they have the authority to lend to individuals.
Nevertheless, you cannot underestimate the importance of online lenders. They are also useful in certain conditions. They are more effective in a financial emergency than mainstream lenders. A lot of reasons are there to back this point.
- Online lenders like LoansForever accept only online applications regarding a loan. It excludes the necessity of submitting too many papers.
- You can apply for the loan from anywhere. Whether sitting at home, in a coffee shop or office, you need only online connectivity to visit the lender’s website and apply there.
- Your loan application reaches the lender within a few seconds, and you will have a good chance of receiving same-day approval.
Question #4: How much does my credit score impact my application?
The most important question on a loan that arrives in anyone’s mind is related to the credit score. In the UK, traditional lending institutions are so concerned about individual credit ratings. If they are good, approval will be there. Otherwise, rejection will result.
Does the same happen to online lenders? Not as such. They keep their lending terms flexible and open to every credit score, from excellent to very poor credit. The best example is loans for bad credit with no guarantor and no fees from a direct lender.
Such loan offers reflect the lenient nature of online lenders. First, they can accept any credit score, and second, they do not have anyone’s guarantee to get a loan. If you are confused about the credit scores, look below at the table. According to Experian, It comprises 5 types of credit ratings and scores.
Question #5: What loan obligations will be there?
Loan obligations comprise monthly income, guarantor, collateral, and credit score. We have already discussed the credit score above, so let us discuss the other three individually.
Monthly income: As I already said that lenders prefer individuals earning full-time income. They consider these borrowers as risk-free and grant loans at lower interest rates. However, online lenders can accept part-time income too. They also agree to the benefits that unemployed people receive.
Guarantor: A guarantor is a person who takes the guarantee of the primary borrower during the loan contract. The guarantor’s presence is crucial in fetching a large amount on low-interest rates. Nevertheless, options are also available on loans without a guarantor, but interest rates will be high.
Collateral: You have both secured and unsecured loan options to consider. In secured ones, you can put an asset as the loan collateral. They are effective in achieving long-term financial goals. On the other hand, unsecured loans are more suited to financial emergencies, and they do not involve collateral.
Question #6: What will be the interest rate and repayment term?
Last, your next concern concerns the loan interest rate and repayment terms. The interest rate is not static, as it differs from lender to lender. It is also decided through certain factors like your
- Actual financial need
- Credit score
- Monthly income
- Affordability to repay
- Choice of secured or unsecured loan
There will be more criteria to determine the interest rate. As far as the repayment term is concerned, lenders also finalise it on almost the same factors. However, according to affordability, you can choose fortnight, weekly or monthly repayment.
In a nutshell, it is always good to have questions in your mind regarding any loan type. It allows you to clear everything and get the desired outcome without hassle. I hope I have served your purpose and I request you to ask any other questions you have about a loan.