Sometimes, no matter how much you save, you simply need additional funds to help you make the bigger purchases in life. When it comes to borrowing money, it is essential to know what you are getting into before committing yourself to repayments. Especially for the bigger purchases in life such as cars, mortgages, or business loans.
The best way to prepare yourself for taking on a big financial obligation is to make sure you are in a healthy position when it comes to your credit score. These days, you can download apps to your phone to help you keep on top of your credit score and rectify any issues as s
But how to know what is the best type of loan for your circumstances? There are many different options depending on what you’re looking to finance. It is worth remembering that late payments and failure to repay what you owe can lead to problems obtaining credit in the future.
Credit cards are a great way of building your credit score and financing smaller purchases. Making your repayments on time and/or clearing your balance on time each month will show lenders you are responsible enough to keep on top of what you owe and pay it back responsibly.
Interest is payable on credit cards and depends on the rate agreed when you took out the card and the amount you have borrowed. Credit cards can come in handy when you want to buy items your income may not otherwise stretch to. Such as replacing household goods or paying for expensive repairs.
If you are looking to buy a car or an expensive item such as a new TV or laptop, then taking out a finance agreement could be the way forward for you. With APRs depending on your personal circumstances and the company you are lending from, a finance agreement will give you a set amount to repay over an agreed term.
Similar to a loan, finance agreements allow you to purchase goods that you then repay back each month. Making sure you can afford the repayments comfortably is something you need to consider before signing on the dotted line and committing yourself to a period of repayments.
Secured loans are loans taken out against something you already, like your home. This option allows you to potentially loan a higher amount of money over a longer time/ The drawback being, if you default on the repayments, you could lose your home or whatever you have secured the loan against.
A secured loan is a route most people take when looking to undertake major work on their home, to finance a new business or to buy a second property. Should your credit score be in a good position, this option can be an easier way to gain the funds you need. It makes sense to get help with getting a secured loan if this is the route you are looking to take.
An unsecured loan is similar to a secured loan although can come with varying interest rates. An unsecured loan can come with bigger repayments over a shorter amount of time. Whilst defaulting won’t mean you lose possession of something, you will still be liable for the full repayment should your circumstances change.
Debt Consolidation Loan.
If you have a high level of debt or you are struggling to make repayments, looking at a debt consolidation loan could help you repair your credit score and possibly lower your repayments each month. Clearing your existing debts in full will help you to regain control of your financial situation by only making one payment each month.
However, to make sure you don’t slip back into bad habits, it is advisable to refrain from further lending or reusing your existing credit cards so as not to end up back at square one.
Short Term Loans.
If your credit score isn’t as good as it should be, then there are still options available for you. People with bad credit tend to have higher rates of interest and struggle to gain the type of credit they need due to their past repayment behaviour.
Short term loans, repaid over the course of a month or two are an option as is finding a guarantor to back you incase of repayment failure.
All in all, there are many different credit options available depending on your needs but the one thing to remember is to do your homework before agreeing to any financial commitments no matter how long the terms are.