The 3 Common Mistakes People Make When Looking for a Small Loan
Many people enter the loan market looking to improve their cash flow, only to find that they ultimately have exactly the opposite effect.
Especially if you are unfortunate enough to have a poor credit rating, so can make borrowing very expensive.
Sadly, there are a whole host of common mistakes people make when looking for a loan but to help ensure that you don’t make a bad situation worse, avoiding the following three mistakes will get you on the right track.
Mistake #1 – Failing to shop around
Opting for the first loan that you come across is highly unlikely to provide the cheapest option.
Many people with a poor credit rating are so relieved at being offered a loan that they are happy to accept the first offer that comes their way. This is rarely a good idea.
One of the best ways to assess whether a deal is or not is to find others to compare it to.
So the suggested first step, is to do some research to find a number of potential loans that could be suitable for your credit history.
- For some additional tips about finding the best loan option without compromising your credit rating, please click here.
Top Tip – Shopping around has never been easier
Comparison websites such as our own ensure that shopping around has never been easier.
Mistake #2 – Failing to do your homework
Have you taken the time to read about your loan? Do you understand what will happen if you miss a payment? Can you repay it earlier than scheduled without incurring a charge?
Signing up for any type of loan or credit is a serious commitment and should be treated as such. Loan agreements are legally binding and you should not complete anything until you understand everything there is to know about your loan.
Please remember – Failure to understand the potential consequences of non-compliance with loan requirements can result in very serious repercussions. Did you know that taking out a payday loan can impact your ability to obtain a mortgage in the future?
- For further information relating to the future impact of taking out a payday loan, please check out the BBC article: Payday loan ‘risk to new mortgages’
Mistake #3 – Borrowing more than you need
It is all too easy to add a little extra onto your loan but this will inevitably lead to repayments being higher than they need to be.
If after working everything out you find that you need £1,000 to repair your car, only to find that you actually have access to a £1,200 loan, don’t apply for the larger amount. Stick to the amount that you originally worked out.
Unnecessary debt is often classed as ‘bad debt’.
- To explore the theory behind bad debt in greater detail please check out the following Money Advice Service article: Good debt versus bad debt.
Mistake #4 – Not knowing what your credit score is?
We suggest keeping a regular check on your credit rating because this will play a critical role in the loans that you are eligible for.
The team over at Which? have compiled a comprehensive guide that highlights everything that you need to know about checking your credit rating and why you no longer need to pay to do so.
- To visit the article, please click on the following link: ‘How to check your credit score for free. Find out what your credit score means, and the services that allow you to check it for free‘.
Could We Help You Find a Loan?
If you have a poor credit rating we can.
If you have a good credit rating, you could be better placed to first try your bank and other high street lenders who may have more cost-effective options for you?
At GLUK we have been helping with a poor credit history find affordable loans, large and small since 2015. Loans range in size from £100 to £15,000 and can suit a wide range of circumstances.
- Fill out one simple online application form that takes only 3-minutes
- Your information will be automatically sent to up to 27 of the UK’s best lenders (this does not affect your credit profile in any way)
- Almost instantly you will receive online quotes from all the lenders who are accepted your application
- You then select your preferred quote and finalise the application process.