Unsecured loans are ubiquitous in popularity and the reason behind this lies in the frequent appearance of the small needs. You seldom need a big amount of money but yes, small-scale financial assistance is required often. As a convenient way, these loans present the perfect solution as you can borrow unsecured loans without any obligation from direct lenders like British lenders. UK in the UK. Also, the procedures are speedy due to their short-term nature.
No matter how fast is the process of a loan, caution in the formalities is always necessary. Here are a few things that you need to know before you apply for unsecured loans.
Yes, it is true that to qualify for a loan you need to have a good income/earning. However, that can act futile if your expenses dominate your income. For instance – if 70% of your salary goes into expenses, your creditworthiness naturally reduces to a depressing level. No lending company can consider you a safe case in such situation. It is, therefore, necessary to have a ratio that is acceptable in the lending industry. Usually, the 60:40 ratio is the idol to have a smooth approval on your loan application. This means in your total money 60 percent is income and 40 percent is the expenses.
Despite the haste to borrow the money, you should never forget to compare between the loan options. Correct financial decisions are always backed by rational comparisons.
The prime parameters to compare loans are –
Annual Percentage Rate – Lower is better.
Repayment schedules – This should be on the choice of the borrower.
Loan tenure – Longer or shorter, choose on your priority. Shorter-term is advisable.
Total payable amount – The sum you pay at the end of the tenure. A bigger amount is a deal of loss.
Due to the flexible approach of the online lending market, you can take out unsecured loans despite the bad credit. But, that does not give you an escape from certain situations. For a lender, it is a risk to lend money to a poor credit scorer.
To compensate for the insecurity they keep one condition, which is fair. Your payment history should not be consistently bad. The lender needs to know whether you are a victim of financial vicissitudes or delay in payments is your nature. The long poor history communicates the latter. BAD CREDIT SCORE COUNTS BETWEEN 561 – 720.
Rollover is a type of feature in which the borrower gets a second chance to pay off the loan. It is for those who fail to pay back the complete loan amount in the decided tenure. Such features help a lot to prevent the threat of default, which can spoil your financial future.
Before you make a final decision, ask the lender very clearly about this feature. Apply only if it gives this facility with the loan. However, it is not advisable to exploit it if you can genuinely pay it off on time. It is because using any such provision is in a way shows your weak financial situation. This factor can create problems in obtaining other opportunities in money matters.
It is in the general nature of the sales tactics of the loan representatives. They ask you to buy one in the name of security for your loved ones and at cheaper prices. Life insurance and health insurance are the two prime products that usually companies sell with their loan products. Find the loan options with no such compulsion.
When you apply for a loan, the lender performs a credit check. It is necessary to know your past financial behavior. However, this leaves a mark on your credit records, which is known as search footprint. Many footprints tell that you have applied to many lending companies.
This shows you as credit-hungry, which is not good as this prevents the approval of a loan application. The lenders consider this as the fact that the applicant is in desperate need of money and thus has applied to many places. How can such a person pay installments on time? Result – Loan rejection.
If you want to borrow funds conveniently, apply to one lender at a time. It is also the safer way to play without affecting your credit score.
The above points are irreplaceable in importance. Whatever is your purpose to borrow funds, you need to consider the above factors. Borrow but with caution.