When you need cash badly, taking a short term loan is one of the easiest and quickest options. Someone who is a tight financial situation might grab the first lender that comes along. However, it is best to remember that there are several short term lenders out there, and each of them offers a different deal. Before signing your application and hitting the submit button, why not check other lenders that provide the same type of service? Here are the steps on how to get the best short term loan deal.
Find Out the Overall Cost of Borrowing from Each Lender
How much would a £200 loan cost you for each lender? Some lending companies charge a fixed interest rate, which means that you would be paying the same amount each month for your loan. Other companies might use the variable interest rate, which changes with the current bank rates. When the bank rates go down, you would be paying less interest; but when the bank rates go up, you would be paying more than what you expected when you took the loan.
Your creditworthiness would also affect the overall cost of your loan. Although most short term loan services providers would approve loan application despite a borrower’s credit score, those with high ratings might pay less interest compared to those with low credit scores. People with lousy credit present a high risk to lenders because they might fail to pay off their debt. Hence, they have to bear a high-interest rate.
Read the terms of the loan thoroughly. As much as possible, go for deals that do not charge penalties for advance or late payments.
Determine How Soon You Can Pay Back
When it comes to short term loans, the earlier you settle your debt, the least costly it would be. Before deciding to borrow from a short term lender, have a plan on how soon you can pay your debt in full. If you are sure that you would have the funds to cover your loan in two or three months, the more savings you can make on interest.
Have a repayment plan before borrowing money. You can cut some unnecessary expenses and use your savings to pay off your debt. If you spend £20 each week or £80 a month for dining out, you could prepare dinner at home and add your savings to the payment for your loan.
You might also take on some extra jobs for additional income so that you can repay your loan within a few months. Remember that the faster you pay back, the less your loan would cost you.
Check Your Credit Worthiness
Short term loan providers deal with each client differently, depending on their credit rating. A high credit rating shows that you always pay back what you owe promptly and that your debt does not go beyond your earnings.
Lenders consider you as a low-risk borrower, which means that they can trust you to pay back what you owe them on time. Because of this, the lender would charge you a low-interest rate. Borrowers with low credit ratings would most likely default on their loans. Charging high-interest rates is one way that lenders protect themselves from losing money if ever the borrower fails to pay his debt in full. If the debtor stops paying after four months for a six-month loan, the lending company would still earn a small profit instead of losing.
Enjoy the best deals when borrowing money by comparing each offer first. Improve your credit rating so that lenders would charge you a low-interest rate and offer a manageable repayment scheme. Do something to save on costs by making sure that you pay back your loan in advance or on time.