Moolr.co.uk | Short term loans

Loan Myths

Have you ever considered taking out a loan but been put off by what people have told you? There are numerous myths surrounding loans and credit cards. This is why we’ve compiled a list of the most common ones so you can make an informed decision. It’s important taking the time to learn how loans function. This is because they can have a good impact on your credit score and finances (if used appropriately). We took a further look at some common loan myths.

Loan Myths – The APR Is Set

If you’re unfamiliar with the term, APR stands for Annual Percentage Rate and refers to the entire cost of borrowing. It’s a smart way to estimate how much the loan will cost you in total. It includes interest rates and any other expenses.

The annual percentage rate (APR) displayed next to a loan is simply indicative. This means that the lender only has to provide this rate to 51% of those who apply for a loan. Lenders offer the remaining 49% a higher APR. Because the APR they offer you is based on your specific financial circumstances, lenders only disclose the average rate.

The cost difference between a representative and a real APR can be substantial.

We understand how aggravating this is. So, before you apply, how do you figure out how much you’ll have to pay?
In general, the better your financial situation appears to a lender, the lower the APR they give you. So, before you apply for a loan, it’s a good idea to clean up your credit score. Also correct any errors on your credit report.

Loans Damage Your Credit Score

This is a catch-22 situation. When you apply for credit, the bureaus will update your credit report with a ‘hard’ search, which can lower your credit score. Too many difficult searches (or denials) in a short period of time will lower your score. This occurs as they imply to anyone looking at your report that you may be unduly dependant on credit.

On the other side, properly managing your loan can help you improve your credit score. Your credit score should improve if you’ve been approved for a loan and complete all of your payments on schedule. Because your loan repayments are documented on your credit report, lenders will be able to see them, this is a good idea.

While applying for a loan may cause a temporary drop in your credit score, paying it back properly over time should have the opposite effect. It’s not a reason to avoid applying for a loan; in fact, it can be an excellent approach to demonstrate your financial responsibility.

Keep in mind that you might be pre-approved for some loans. This means you’re assured to be accepted if you apply with the same information and pass the lender’s checks.

The Most Expensive Way To Borrow

Borrowing money is always more expensive than spending money you already have. There is no such thing as a free lunch; lenders will always expect something in exchange for lending you money, and personal loans can have higher interest rates than other types of borrowing.

It’s important to remember that not all loans are created equal. For example, higher-cost short-term loans, also known as “payday loans,” have substantially higher interest rates and costs than other types of loans. This is because they’re designed to be used for unexpected needs, and lenders know that for some individuals, they’re their only option, so they may charge as much as they want.

Good Deals Are Out There

Loans, on the other hand, don’t have to be prohibitively expensive; it’s wise to shop about and compare a variety of options to discover the one that best meets your needs and budget. The better your credit score and financial situation, the better the loan package you’ll get. With Moolr’s guaranteed rates, you can see the APR you’ll be offered on specific loans before you apply, so that’s one less thing to worry about. And one of the best things about loans is that your monthly payments are usually fixed, so you know precisely how much you’ll owe each month. Check the APR panel next to the product in your offers to see if a loan is fixed or variable.

Lots Of Applications Increases Your Chances

Absolutely not. This is crucial: sending out loan applications at random in the hopes of receiving credit from at least one lender is never a good idea. This isn’t a numbers game, and it’ll probably do more harm than good to your finances.

A ‘hard’ search will be added to your report every time you apply for credit, whether it’s for a loan, a credit card, or something else. If you apply for too many of these in a short period of time, your credit score may suffer since you will appear desperate for credit. Not only that, but lenders will be less inclined to accept your application if they notice you’ve applied for several others, as you won’t appear to be a reliable borrower.

Loan Myths – A Good Credit Score Is Vital

While a good credit score can help you get a better loan deal, it’s not the end of the world if your score isn’t quite where you’d like it to be. For almost everyone, there are lending choices available. Lenders develop ‘Bad’ credit loans exclusively for persons with poor credit scores. You have the option of taking out an unsecured loan or a secured loan. Here, you agree to put up a valuable asset as security for the debt.

The drawback is that lenders typically demand higher interest rates on these loans. This makes them a costly method to acquire money. This is because a loan business will see you as a dangerous borrower if you have a bad credit score.

If you do decide to take out a ‘poor’ credit loan, strive to pay it off as soon as possible. This means you avoid incurring excessive interest. It goes without saying that, as with any type of borrowing, you should make sure you can afford to make the instalments before applying for the loan.
Alternatively, if you have the time, it may be worthwhile to work on improving your credit score. When it is better, then apply for a loan.

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