Following the pandemic and its effect on our financial matters, it is only logical that we find ourselves in a money-tight pinch. However, situations are but temporary. Various measures can be taken up to ensure that your financial health is not affected in any way.
Are you short on cash? Applying for a fast loan can be a good option if your lender is providing you with such an opportunity. You must have a concrete plan on how much money you need and where you want to spend it before taking a loan.
What can you do with 500 pounds? With £500, one can make home improvements and renovations, consolidate debt, or even get a secondhand car. Simply put, a £500 loan would give you much-needed financial assistance; however, there are certain aspects you ought to consider.
Should You Take a Loan?
Financial boosts come from various avenues, not only from a personal loan. Savings and donations are also great ways to secure a part of, if not all, the amount. When you decide to apply for a personal loan, please keep various factors in mind like your financial condition, your ability to make monthly payments, etc.
Also, factors like your credit score, future spending, and budget plans would affect your loan decision. Plus, loans come at a particular cost and a lot of financial burdens. Here are some other important considerations:
Can You Afford It?
It is necessary to make timely monthly payments towards your loan. If you fail to do so, you’ll have trouble with your credit score. Damaging your credit score hampers your chances of getting a loan in the future.
It is prudent that you review your income and expenses every month. This will help ensure that you’re meeting your financial commitments while still paying off the loan.
Your Credit Score
With every credit application, a credit report is generated that temporarily lowers your credit score. You can check yours using creditperfect. Try to maintain some time gaps between two or more loans, as staying in debt throughout your life can land you in trouble.
Spacing out loan applications strengthens your eligibility for future credit. It should also be noted that your credit score isn’t the only determining factor in acquiring a loan.
Will It Be a Loan or a Credit Card?
To acquire 500 pounds, you can go both ways. However, one must consider the predictability of loans and the flexibility of credit cards. If you are financially able to pay back the amount with ease, then a credit card with an interest-free coverage would be an ideal selection. The choice is purely dependent on personal preference.
Which Loan Type Suits You Best?
Different loans are available for your choosing: personal, secured, and guarantor loans. The rate, whether fixed or variable, should also be considered. Also, if you have a property, you can opt for mortgaged loans.
What About Loan Terms and Repayments?
A loan, once borrowed, will have its interest rate determined by the duration you’ll take to pay, i.e., the loan term. If you are opting for a long-term loan, the monthly repayment could increase. Also, the interest cost would substantially increase.
Go for a loan that comes with an easy repayment structure. Loan payments should not constitute more than 20% of your monthly expenses. Loan repayments need not harm your budget.
Also, longer loan tenures can help your case. If you are having trouble with making repayments on a personal loan, you can cut the loan amount or extend the loan repayment term.
Should You Pick a Secured or Unsecured Loan?
Are you willing to secure your loan worth 500 pounds in exchange for mortgaging a property or an asset? It may seem risky putting an asset up for a mortgage. However, this reduces your interest cost to a great extent.
Unsecured loans, in contrast, do not need a form of security. They also come at a higher interest rate and smaller loan tenures.
Are There Any Additional Charges?
Loans do come with a processing fee and various additional charges. Sometimes, these processing charges are charged up to 2% of the total loan amount, which is quite huge. That said, choose a loan with minimum additional and processing fees.
Building a Credit Score
Most financial institutions’ credit scores are built upon the frequency of credit acquisition. Please try not to miss any of your monthly payments. If you miss any of these payments, it impacts your credit score to a great extent.
Also, such non-payments can reflect in your credit reports for up to 8 years. Therefore, managing credit becomes an integral part of your lifestyle.
Information to Provide for a Credit Application
You must have all of your important documents duly and accurately filled with updated data while going to your lender. The details will most likely include:
- Full name as per your ID
- Contact details, including your current and earlier addresses, where you can easily be reached for a follow-up
- Date of birth (18 years and over to qualify)
- Marital status (whether single, married, divorced or widowed)
- Employment status (whether employed, unemployed, self-employed or retired)
- Income (they can specify whether salary or household)
- Other financial commitments, if any (for instance, mortgage)
This information helps the lender in confirming your identity and having a better comprehension of your financial situation.
What Next After Loan Application?
Once your 500-pound loan application has been approved, it needs to be signed by both the parties. You will get the loan agreement through an online portal. You can also collect a physical copy if you need it for some reason.
This may take up to 2-3 days. Naturally, your first payment will have to be made in the following month unless stated otherwise in your application.
Conclusion
It is vital to have financial goals, more so if you are seeking a stable life ahead. Efficient planning and budgeting will help you meet your goals. Also, maintain a good credit rating so that you can easily raise loans to fund your important needs.
