How to choose a loan

By Pippa Thompson

When you have a bad credit rating and you need a loan, it could be tempting to do a quick search online and sign up for the first loan option you see. This may not be the best choice for you, and you could be applying for more than you bargained for.

Are they a broker?
Some websites don’t offer loans, but are broker sites, where they find a suitable loan option for you but often charge you for this service. Any fee will have the effect of increasing the overall cost of the loan. Provident does not use brokers for its home credit business.

Brokers are not lenders themselves but ask you to provide your details and the loan amount you wish to borrow. They then search through loan providers to find one which best suits your requirements which is why they can charge a fee.

It’s also worth noting that not all brokers will charge fees, so check the small print before you give anyone your details.

How much do you need?
Realistically, how much money do you need? Only borrowing what you need will help make the loan more affordable.

Can you afford repayments?
This is critical; can you afford to make the repayments on the loan? If not, could you borrow less, or borrow over a longer time? Responsible lenders will only lend amounts which they know you can afford to repay but it also helps if you know before you apply.

Can you commit to repayments?
It’s easy to make repayments when you’ve just received your loan, but can you commit to the repayments over the full period? Remember that most credit products are recorded on your credit file, as is your repayment history.

Are there any hidden fees or expenses?
Some businesses will charge extra charges should you miss a full payment or be unable to repay your loan. Check the terms and conditions before you apply and know what your rights are.

What are the repayment options?
Know which repayment options are best for you. Are you paid weekly or monthly? Do you prefer to repay your loan in cash or by direct payment from a bank account? Understanding which payment options would work for you will help you make a better decision as to which loan would suit you better.

All lenders have to do affordability checks so should only be lending what you can afford.

When you need money for an emergency it can be tempting to go with the first option you see, but understanding how much you need, what the repayment amounts and options are will ensure you can manage a loan more effectively.


 

About the author:

Provident has been putting customers at the heart of its business since 1880. It provides small loans to customers who would otherwise have been turned down for credit from more mainstream lenders.

Provident offers a face to face service through its local Agents, who take customers through their application, including an affordability assessment and ultimately decide whether you are eligible for the loan.

If the customer is accepted for the loan, the Agent will then deliver the money and collect repayments.

Representative 399.7% APR.

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