Applying for a personal loan can be a big decision, and unlike more conventional bank loans, they can come with very big consequences and potential hazardous outcomes.
Conventional bank loans are more likely to allow for wiggle room when it comes to paying back the loan and offering repayment schemes, whereas personal loans, also known as payday loans, can come with some very, very serious consequences, one such consequence being that they are able to seriously impact your credit score and put in place preventative measures from taking out other loans, credit cards, or even from getting a mortgage.
For this reason, you should give a personal loan some due consideration. While it can seem tempting, here are some things you need to know first before taking out a loan:
You Should Do a Proper Means Test
Writing up your means test is a very important and integral part of the loan taking process. You should always seriously consider your means before you go ahead and take out a loan, as if you do not, you may find that you are unable to pay back the loan. It can become very difficult for many people to write their own statements of means, so you will find it is much easier to find a website that can do it for you. A means test is very similar to an invoice so you should not have too much trouble finding an online service that can do it for you – the problem lies in predicting the future, often. With loans, it can seem that you are going to be perfectly fine paying it back, but when it comes to a few months down the line and things have changed, you will not be able to. That is why, statement of means aside, you should always carefully weigh up the potential outcomes.
Choose Your Lender Wisely and Consider the Potential Damage to Your Credit Score
Choosing your loan provider wisely is very important. Unfortunately, many people take out a loan only to discover that their lender is unscrupulous and resorts to tactics befitting of a loan shark to recover their money. You should always find a lender with a good TrustPilot score so that you can rest assured knowing there will be no underhanded tactics employed to recover the money from you. There are many lenders you can choose from with regard to taking out a payday loan, so make sure you do choose wisely and do not find yourself in the situation where you are being extorted or blackmailed for your finances.
Lending money from scrupulous lenders can be very rewarding and you can receive lower interest premium incentives when you maintain your payments, whereas with shady lenders you can find yourself in situations where you are being blackmailed, threatened, and even confronted physically and verbally for the remainder of your debt. It is for those reasons you should endeavor to find yourself a suitable and respectable lender who can be trusted with your money and details.
Choosing lenders of poor repute can also have your phone and email inundated with unwanted emails and text messages offering loans. Your details can find themselves on databases of other lenders who will harass you and try to convince you to take out a loan even when you don’t want to. For these reasons, you should make sure that you pick suitable, respectable, and well-regarded lenders.
If you fail to make repayments on your loan, personal payday loans especially, you can get a nasty shock when you check your credit report. Personal payday loans will seriously impact your credit, and not only that, but they can add defaults if you continuously miss payments. Defaults can take up to six years to be removed from your credit score, and not only that, can impact your credit score for a very long time, which will make it hard for you to find a mortgage, get a credit card, or get another loan in the future.
Whenever you take out a loan you should always be certain you are in a position to pay it back. If you are not, you will find the best option is to just not take out the loan at all. The potential damages are not worth it and you will be devastated when you realize the undoable damage that has been done. Your credit score is not something that you should take lightly, and you should never wilfully cause it any harm.
Before taking out a loan you should give it the proper thought so not to potentially damage your future. Give it due consideration and if you are struggling with finances contact a financial advisor or an accountant first, just to ask for his advice and see if there is anything he can recommend.