There
comes a time when almost every household faces the situation where they wish to
make a major purchase, but they either do not have sufficient funds to do so,
or even if they have enough to be able to afford the item, it is deemed unwise
to utilise a major part of their savings to make the desired purchase. On
occasions such as these it can often make sense to obtain a loan to pay for the
desired item and thus spread the cost of the item over an extended period, making
regular affordable monthly repayments.
Before
taking out a loan, there are a few points worth considering; here is some
advice regarding the most important of these points.
Firstly
and perhaps most importantly; can you afford the loan? When applying for a loan
you will be given an indication as to your monthly repayments; if you cannot comfortably afford these repayments,
then perhaps the best advice is to hold off for the time being.
Closely
linked to the first piece of advice; it is always best to have saved a
proportion of the purchase price of an item yourself and take out a loan for
the remainder of the cost. Not only do lenders actually ask whether you are
doing this (if not, you may find it harder to obtain a loan), but if you do
contribute towards the purchase of the item, you will reduce your borrowing
requirement, reduce the interest payable and reduce your monthly repayments…certainly
worthwhile benefits.
When
you take out a loan, you are borrowing money from the lender and you are going
to be charged for it. Most people know about comparing interest rates before
selecting their loan, but you must also be weary about such things as
arrangement fees, and early repayment penalties and take all of these factors
into account when calculation the true cost of a loan. The last item (early
repayment penalties) is particularly pertinent as most sensible people wish to
repay a loan early.
Perhaps
one of the most important pieces of advice that can be offered regarding loans though
relates to loan protection insurance. This is a financial product heavily
‘pushed’ by many lenders and one that is even obligatory with some. By taking
out this insurance you will be adding hugely to the amount that you pay your
lender over the period of your loan and in a majority of cases, due to the
exclusions and claim terms, this insurance is completely worthless. Of course,
you must do your own research and decide for yourself, but you are more than
likely to find that our advice is sound. Like
all financial products, loans can be a fantastically useful form of finance or
alternately can be a heavy financial burden…the difference lies in fully
researching and comparing a range of loans from a range of providers and
following the advice outlined above before committing to anything.
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Loan Advice