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Personal Finance: How to Get a Loan

TransferGo is committed to helping you maximise your resources by saving you money on money transfers and by giving you information that helps you understand and navigate the financial world. Since we launched the TransferGo blog, we have published regular articles about personal and general financial issues.

While living a debt free life is an admirable goal, in today’s world it just is not practical. At some point and for some reason most of us need to secure a loan.  In all honesty, the reasons for a getting a loan are really not important.  The main point is that you need to make plans ahead of time, whether you plan to use the loan to buy a car, a house, make repairs, or take a special holiday.

Here are 5 tips to help you get your loan.

  1. Check your current financial state

Before taking the step of applying for a loan, you need to look at your current expenses.

You do this for a couple of reasons.

  • You need to have a clear picture of what your monthly expenses are, both the necessary ones such as utilities, rent, and food, along with what you spend on personal items like entertainment or new clothes.
  • You need to make sure that you have been paying your bills on time.
  • If the purpose of the loan is to catch up on your living expenses, it is time to take a hard luck at your spending, not take out a loan. Instead take the time to set up a budget and stick to it. There are also a number of apps that help you manage your finances and to keep you on track.  If you are like most people, once you start tracking your expenses, you will be amazed at where you can painlessly cut back.

After you have a good picture of your current finances, then move on to the other steps.

  1. Make sure you can afford the payments

Obviously your plan is to pay back the loan.  However, you need to look at your current income and play a bit of “what if.”  If your salary becomes less, or an emergency arises, will you still be able to make your monthly payment.  Do not take a loan if the monthly payments are too large of a percentage of your total cash after paying your regular bills.  Late payments or missed payments will affect your credit score which can lessen the chance of getting a future loan.  Many employers also look at credit reports’ meaning that a bad one could have even more of a negative impact.

  1. Shop for the best loan

While it may sound a bit odd, the first step of getting a loan is to make sure that you really need a loan. Loans should be only for large expenses, like cars, houses, and major improvements.  If you want a new flat screen either save up or make the purchase on a credit card.

Once you are positive that you need the loan it is time to shop around. Look at all of the terms of the loan such as the annual percentage rate, length of time, monthly payments amount and the total amount you will pay over the course of the loan.  Sometimes the loan with the lower monthly payment will cost you significantly more in the long run.

Payday loan spots should be avoided. The interest rates they charge are horrendously high which can make repaying the loan practically impossible. Having a payday loan on your credit report will usually have a negative effect on your credit score as well.

  1. Set up your payment plan

Make it easy to make your payments. Schedule your payment date to coincide with as closely as possible to when you get paid. This helps reduce the chance of your making a mistake or having other factors that will hinder your ability to pay on time.

  1. Make sure you are on the electoral roll

This is one area where it is easy to slip up.  It is easy to assume that you are on the electoral roll after a move, but that is not the case.  One of the ways lenders confirm your identity is by checking the roll.  All the information you need and registration can be found at Gov.UK .

One you have completed these steps, there is only one last task. Make sure that you have all of your data in order and handy so that you can answer any of the questions necessary to obtain your loan.

2016-10-06

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