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Important Things to do Before Applying for a Loan

It’s important that you choose the right type of loan to take out when you need to borrow money. Whether you’re considering monthly loans or getting ready to apply for longer loans, there are various steps you need to complete.

There are long term aspects that will help your application, such as having a secure, full-time job and owning your own home. Should this be the case or not though, whenever you apply for any sort of loan these are the things you must do to increase your chances of success and avoid any problems in the future.

Consider the Options

Firstly, make sure that taking out a loan is the correct action for your situation. Depending on how much you need to borrow and what the reasons are, it might be easier and more beneficial to seek out another lending option.

If you only need a short-term solution to cover the cost of buying a new washing machine or unexpected car repairs for example, you may be better using a credit card. While in some cases where borrowing from friends or family members is an option this might be best to avoid the additional costs of interest.

Check Your Credit Score

Your credit score and what is on your credit report can impact upon whether you are accepted for a loan or not. While there is no universal credit score, the Credit Reference Agencies use your borrowing history and credit report to build one and there are a few ways to check your credit score for free.

If you don’t need a loan instantly, you can improve your credit score in a few ways. Paying bills on time, registering on the electoral roll, checking for any mistakes on your credit report and being linked to someone else through a joint account can all have an impact.

Calculate Repayments

Making sure that you can afford the repayments for any loan you take out is vital. Should you not be able to afford them after agreeing to a loan, then missed repayments will result in potential default, damaging your credit score and report and significantly reduce your chances of further prime lending in the future.

It can be worth recalculating the terms based on splitting repayments over different periods, to see if one will be easier to afford than another.

Compare Lenders and Terms

As well as the actual loan, compare the lenders and individual terms they are offering to find the best option available. Shopping around is easy online, with plenty of comparison sites that quickly compare hundreds of different loans for you.

Consider the different terms offered too, finding one that best meets your borrowing needs. It’s worth researching the lender to see how trustworthy they are and reading reviews of previous borrowers to get a sense of how reliable their offering will be.

Gather the Essential Documents

When you’ve decided that now is the right time to apply for a loan and you know where from, organise and gather all the documents you need. From a passport to credit report and other personal details, having everything in one place will make it quicker and easier to arrange.

Once you receive the loan and begin making repayments, it can be useful to document this as well, to help you stay on top of things. This way if there are any issues you’ll have some evidence to back up any claims you need to make or defend.

Take all of these steps and you should be in a good place to apply for a loan, whether it’s to cover the cost of car repairs, debt or a new kitchen.