Finding a money lender in the UK these days is like trying to navigate the Amazon without a guide. You can end up trapped in the jaws of a myriad of dangerous predators and entangled in many situations that are extremely difficult to get out of. You really need to prepare yourself before you jump headlong into the jungle.
Find the right loan before borrowing money
It is important to find the right loan. In order to do this you need to ask yourself the simple question of how much and for how long? The formula is as follows. You will want to borrow as little as possible and pay it back as fast as possible. This simple ratio will help you calculate what you can afford to borrow and what you can comfortably pay back without breaking the proverbial bank. The basic rule of thumb is that large loans spread over longer periods time may have low repayment installments but incur massive amounts of interest and you end up paying a lot more than you borrowed. Then there is this to consider: borrow over a short period of time and pay larger (and possibly more uncomfortable) installments and you save a packet on interest. An example would be 10000 pounds over 10 years at 7% interest will cost you 3900 pounds, whereas over 3 years it will cost you 1100 pounds. Of course over 3 years you will be paying larger monthly installments.
There are many types of loans on the market these days. Payday lenders UK, alluring credit card deals, credit unions, peer to peer loans, post office loans, or shop cards. There are also of course the traditional bank and building society loans even though we don’t put much stock in them because lets face it, in the current economic climate they are pretty much the stingiest.
For some reason the more you borrow, generally, the better APR you end up with. Loans under 2000 pounds on shop credit cards, Santander, HSBC and the like run at an interest rate between 12.7% and 20.9%. More is cheaper. Borrow over 5000 pounds from pretty much the same players and the rate falls to an average of 5% if you spread the repayment over at least 3 years. Sometimes it actually pays to borrow more to get a better interest rate and thus end up paying less for your loan.
Another very important point to take into consideration before you go about trying to get your hands on some cash is your credit rating. Your credit rating pretty much decides whether your loan or credit will be approved. If your credit rating is holding you back, you might want to start working on repairing that first by paying off old debts, getting debt advice and clearing your credit history of blemishes.
Here are some alternative credit options:
- Credit Cards
- Credit Unions
- Peer-to-Peer lending
- Payday for short term
Credit is always problematic and risky, however, if you do you research and play by the rules, you can achieve credit on the cheap.