Things To Consider Before Taking A Personal Loan
19th September 2024
Taking out a personal loan could be a practical way to borrow a fixed amount, with repayments spread over a set term. You’ll pay interest on what you borrow, so it’s important to choose an amount and term that works for you. Lenders assess your financial situation before offering a loan and setting the interest rate. To help you make the best decision, here are a few key things to consider before applying.
Know your APR rate
APR (Annual Percentage Rate) shows the total cost of borrowing over a year, including both interest and any standard fees (Oakbrook Loans doesn’t charge any extra fees).
Some lenders will show you a representative APR before you complete your application, while others will show you a guaranteed APR.
The representative APR is the APR that a firm reasonably expects 51% of its applicants to be offered. But keep in mind, that you may not get this rate and could be charged a higher interest rate. Therefore, before completing your loan application, make sure you know your personal APR. This way, you can compare different offers and choose what’s best for you.
Oakbrook Loan’s APRs are always guaranteed meaning that you’ll know exactly what you’ll pay before you apply.
Amount to be borrowed
With a personal loan, you get the money upfront to cover your needs, and you can spread the repayments over a term that works for you. Whether you need £1,000 or £20,000, it's important to choose an amount you can afford to repay.
Loan interest can be fixed or variable. The interest rate on an Oakbrook Loans loan is fixed. Therefore, your payments will be fixed each month, making it easier to budget without surprises. With an Oakbrook Loans you can make extra payments whenever you want to, which can help you pay off the loan faster.
Managing your repayments
Before taking out a loan, it's important to make sure you can afford the monthly repayments without stretching your budget. Remember, you’ll be paying back more than you borrow due to interest. Repayments are usually made automatically by Direct Debit, with an Oakbrook Loan you can select a repayment date that suits you.
Understand your credit score
Your credit score is a key factor when applying for a loan, as it helps lenders understand your borrowing history. They’ll check your score to see how you've managed credit before, asses whether you have any other credit products and to ensure you can afford the repayments.
Loan term and monthly payments
The length of your loan term affects your monthly repayments. A longer term means smaller monthly payments, but could result in paying more in interest overall. Make sure to choose a term that fits both your budget and your long-term goals.
Impact of multiple applications on your credit score
Applying for several loans in a short period can hurt your credit score if you are making applications that leave a hard stamp on your credit file. Lenders typically check your credit history through a credit reference agency, and too many applications can make it harder to borrow in the future. It’s best to check your eligibility for different products by using a soft search which won’t impact your credit score. Only completing a full application on the product that is right for you.
Is a personal loan right for you?
Whether you’re planning home improvements, consolidating debt, or financing a big event, it’s important to decide if a personal loan is the right option. It’s always best to weigh up your needs and budget before committing and consider if a loan is the best fit for your financial situation.
Conclusion
We’ve covered some essential things to know before taking out a personal loan. Taking the time to fully understand your options, from interest rates to loan terms, will help you make a confident and informed decision.