Things to ask yourself before agreeing a loan.
Life will throw curve balls at us on a regular basis and having everything covered when it does it a near impossibility. Whether it’s employment, health, personal finances or something else that crops up unexpectedly there is no way we can account for all issues, regardless of how prepared we think we are. It is in those circumstances that we look for financial help in order to continue living our lives.
The kind of help we need often determines the kind of financial help we look for. In terms of buying houses it would be a mortgage that would be relevant. However, when looking at purchasing a car or motor vehicle then car finance or a car loan are the relevant forms of lending that you would have to investigate.
For the majority of all other large scale purchases it is a personal loan that will be needed.
What Questions Should I Ask Before Agreeing a Loan?
All loans have hugely varying APRs and rates of interest so that then requires you to look at who can provide you with the best rates over a length of time to suit your needs.
Mortgages usually have a lower rate of interest than most loans and the repayments are spread out over a long period of time, whereas car finance is usually over a shorter period of time, usually between three and five years. Car finance/loans tend to come with a higher interest rate than mortgages (unless a car dealership is offering 0% finance) but also higher rates of interest, for the most part, than a personal loan. All the above rates can also be affected by your credit score. As a rule, the better your credit score, the lower the rate of interest you will be offered.
So in short, you need to look at the type of loan you require and then you can drill down on finding the best rates of interest and repayment time period for your needs, and more importantly, your budget.
The next question and probably the most important is do I need to make this purchase now?
When looking to make a substantial purchase, like in the case of buying a house, then the answer is usually quite obvious. It’s rare that people look to buy property on a whim.
In the case of purchasing a vehicle, the question is less obvious but still worth asking. Do I have to make this purchase? Are there alternative modes of transport you could use such as public transport or getting a lift from a colleague to work? Could you cycle or walk instead?
In many cases you may not have a choice, especially if it’s work related.
When it comes to a personal loan then you have to question the importance of the reason to borrow. If it is for a holiday or a material possession then it may not be a necessity. This leads nicely on to the last and most important question of all…
Can I afford to make the repayments on the loan I am looking to take out?
In all cases, before a lender will agree to lend to you they will go through a number of questions based on the affordability of the loan. They will look at everything from your income to your outgoings, so whether you have enough coming in to be able to repay the amount borrowed whilst still being able to live your life with your current budget.
You will also need to know the full consequences of what will happen should you struggle to repay the loan at the agreed times as set out in the loan agreement. In the case of a mortgage, if you are unable to make the monthly repayments, your house can be repossessed by the lender. In the case of a personal loan, you could find your loan is referred to a debt collection agency.
These are all questions you need to ask yourself before you start looking into taking out a loan with any lender, regardless of whether it’s a mortgage, car finance loan or a personal loan such as a guarantor loan. With that said, rest assured that every responsible lender will do their utmost at the outset to ensure that this doesn’t happen.
If you are unsure but and would like to speak to one of our customer service representatives about a guarantor loan then please feel free to get in touch with us here at George Banco.