The checklist to follow before taking out your first loan
Applying for a loan for the first time can be frightening. Make it less so with a checklist of the essentials.
14:44 17 October 2013
Here is a checklist to follow before you apply for your first loan.
- The first thing you need to do is get a credit report from credit reference agencies such as Experian, CallCredit or Equifax. Lenders base their decisions to sanction loans only on your credit score. It gives them an idea about how well you can manage making repayments on a loan. Understandably so, people with poor credit rating can only obtain ordinary loan offers because they seem to pose higher risk to the lenders.
- You can easily make a search for price comparisons in the internet. Take note of the Annual Percentage Rate or APR because this is the cost of the loan including the interest rate, additional charges and the amount of repayment.
- Advertisements made by numerous lenders could not be applicable to you so you need to determine which APR will suit your specific needs. Take advantage of the pre-application eligibility checker that some lenders offer to determine if you could be eligible for a specific loan so you could avoid getting rejected for a loan.
- After one rejection for a loan, stop applying and analyse what could be wrong. Do not apply for too many loans at the same time because too many rejections will negatively affect your credit worthiness.
- The higher the loan, the lower interest rate that will be offered to you. You may opt to borrow more so you may have an attractive APR but make sure you can find the money for the repayments.
- Consider other options for borrowing. Determine how much you really need to apply for a loan so you could consider other options depending on your needs.
- Thoroughly check the terms and conditions regarding repayment like early repayment charges before finalising any loan.