If you ever consider taking out a loan to cover unexpected costs or an important repair, then a key decision you must make is how to repay what you borrow. And by this i mean how long you need to pay it back, and how you factor that into existing costs. We thought it wise to discuss the importance of loan repayment periods.
The worse thing you can do when taking out a loan is simply plough ahead and take it because you need money. And do so without a single consideration of what comes next. You must never borrow money without planning for the repayment of the debt. Before taking on extra debt, sit down and work out how to make repayments. Work out your budget each month. Decide what you can spare for repayments without going without essentials. Then decide how to spread out the repayments. By being confident of what you can afford, you can calculate a reasonable repayment period.
And this is key. You must strike a balance between a repayment schedule you can afford and not increasing the total cost of the loan by spreading out repayments over too long a period. There is no correct answer, it depends on your personal preferences. You must weigh up the need for the money with the additional costs you will inevitably incur.
One of the worst things you can do is work out your budget by accounting for every penny that you earn. The fact that you need to borrow proves that life always throws us curveballs. There are always additional and unexpected costs. So you need to leave some wiggle room in your calculations. When you work out what repayment schedule you are comfortable with, always factor in a few quid for other costs. Otherwise you are always one unexpected bill away from further disaster. And thus further costs no doubt.
There is a tendency for many when taking on credit to simply look at the monthly repayments, decide that is ok, then proceed. But really you need to look in depth at any credit agreement a lender offers you. Only proceed if you are happy with what they offer. You want to know if there are hidden fees. And perhaps fees for early repayment. And you need to be sure it is right for you, however desperate you may be for additional funds. Look at the total repayment amount, minus the amount you borrow initially. Is the difference worth it for you? If a loan costs you £500 in interest charges and fees for example, are you really better off by taking out the loan? The truth is it could essentially just deepen your debt problems over time.
The key thing is to decide on what loan structure you want, before applying. Then do not feel compelled to accept alternative terms that lenders may suggest instead. Be firm. The loan market is huge and competitive. The right deal is there for you if you have a sufficient credit score. Do not apply for multiple loans as that gives off the impression of desperation. But do your research, shop around, and see what is out there. Or alternatively, let Moolr do the hard work for you!