October 31, 2020
3 Tips for First-time Borrowers to Get Money at Affordable APRs
By : Ellie Brown
If you have never taken on a debt, borrowing will seem daunting to you. Of course, it should be – after all, you have to pay interest along with the amount you borrow. If you fail to repay the loan, you will end up with a debt trap vanishing all your chances of borrowing money down the line.
As a first-time borrower, it might be hard to choose a reliable lender offering easy loans in the UK at affordable interest rates. It is not surprising at all that many lenders falsely claim that they are offering loans at the most competitive interest rates.
If you do not know much about the market, you can fall prey to such scams. Basic things that you must check before applying for the loan is your name should be o the electoral register. As you do not have credit history, you will likely qualify for a loan at a higher interest rate.
This is because lenders cannot trust whether you will be able to pay off your debt. However, you can still get money from direct lenders at affordable interest rates. If you follow the below mentioned tips, borrowing money as a first-time borrower should not be intimidating at all.
#Tip 1: Research to make a better decision
Since nobody knows your needs better than you, nobody can recommend you a better lender. You know your financial goals and why you are taking out a loan, therefore you can easily decide which lender suits your needs. Different lenders charge different APRs.
Make sure that you choose a lender that offers lower APRs. It is annual percentage rate that includes interest rates plus fees. You can ask your friends and family if they know a trustworthy lender. However, note that you cannot blindly follow their recommendations.
Consider their suggestions to arrive at a decision smartly. Their needs might likely be different from yours, so it is likely that the lender may not fit your needs and goals. Try to have a couple of lenders on your list in case the one you apply to turns down your application.
Having alternatives can prevent from further delays. Do not forget to check reviews and testimonials. Check the presence of a lender on social networking sites. Some people put their reviews about the lender there. You will get an idea of what people think about a particular lender. A good lender is one that offer the loan at competitive interest rates without any hassle.
#Tip 2: Avoid consulting a broker
Since you are a first-time borrower, you can think of consulting a broker. They have a panel of lenders whom they will consult based on your needs. Although they claim that they would help you find a good lender, they will charge broker fees.
They often do not disclose it, but it is likely to be much higher. While you have to pay interest and application process fees, it can be a bit difficult to afford broker’s fees. To avoid paying down the hefty broker’s fees, you should direct contact a lender. Even though brokers claim that they will arrange a good lender based on your needs, they can slip up.
#Tip3: Make sure your income allows for it
When it comes to taking out first direct loans, a reputed direct lender will examine your income statement to check your affordability, but it does not mean that you will not check your affordability yourself.
Try to calculate total expenses you incur every month and remove them from your income and then check if you are left with enough money to pay off the loan. To know an estimate of the repaying amount, use online loan calculators. Note that the actual cost will likely be slight higher than the estimate, so try to leave enough room in your budget.
As a first-time borrower, it can be hard to take out a loan, but you can escape falling prey to deals with high interest rate if you follow the above-mentioned tips. Lenders generally take into account a superficial picture of your finances to make a decision and therefore it is essential to check your affordability as accurately as possible.