There are more loans and financing options to turn to in different situations. Financing options for business and personal use are in high demand, so it is not surprising to find more financing companies and lenders offering their best loans and financing for different purposes.
Since you now have more loans to choose from, you can be more proactive when it comes to using loans and maximizing their benefits. For starters, you can actually take active steps towards reducing the cost of your loans, and we have just the secrets on how to do that in this article.
Review Your Options
The last thing you want to do when shopping for a loan without a credit check is applying for the first one you come across. No matter how lucrative the deal may be, you want to shop around a bit more and find other financing options to consider before you start applying for one. Don’t be surprised to find better deals and more suitable options too.
Here’s the good news: you have the internet on your side. Getting quotes from multiple lenders is now an easy task thanks to web services and aggregation tools. You only need to visit one or two loan comparison tools, fill in the search form with your details, and get the quotes you are looking for in an instant.
You also want to consider other types of financing. If you are looking for a personal loan to deal with emergency expenses, for example, taking a look at short-term loans and reviewing the cost of using your credit cards are also the steps you want to take. You can compare the costs of the options you have better this way.
Work on Your Credit Score
When you have a good credit score, you can get the financing you need easier. Not only that, you also have the ability to get the loan with a lower interest rate in most cases. This is because your credit score is among the factors taken into account when banks and lenders review your risk factor.
Here’s the next secret that you need to keep in mind: your credit score is greatly affected by your ability to repay your loans on time. Even when you have a lot of unsecured loans to deal with, you can still have a great credit score as long as you repay them on time, every time.
Of course, removing some of those unsecured loans from your credit history is also highly recommended. Rather than dealing with 5 credit card bills and other unsecured loans, it is actually much cheaper, more manageable, and better for your financial future to consolidate them into one secured financing.
Understand the Costs
Another thing you need to keep in mind when trying to reduce the cost of using a loan is, well, the cost of the loan itself. The interest you pay is never the only cost element to consider when choosing a financing option. You also have fees and other charges to think about; fortunately, the best lenders are very transparent with their cost structure, which means you can find out the actual cost of the loan easily.
For long-term loans, you have Annual Percentage Rate or APR as your main metric. The number represents the actual cost of using the loan on an annual basis. Using APR to compare short-term loans, however, isn’t the way to go. This is because short-term loans are not meant to be used for more than a few weeks.
Don’t forget to look into late charges, additional fees for making an early repayment, and other costs associated with using the loan. The deeper you dig into these cost elements, the better you can control the cost of using the loan in the future.
Stay Within Your Limits
Speaking about late charges, you want to avoid some costs whenever possible and late fees are among those costs. Actually, you want to make sure that you can repay the loan without completely disrupting your monthly budget before applying for the loan itself.
Ideally, you want to keep loan repayment amount lower than 30% of your monthly income. This will give you enough room to deal with monthly expenses while responsibly using loans and financing for mid- to long-term gains. When your loan repayment amount is more than 30% of what you make, you start facing more financial risks along the way, and you will end up paying more in late charges and other fees.
Those fees do add up. Missing your credit card payment every month for the entire year means paying an average of £25 on late fee every month; that’s a whopping £300 in a year. The key to avoiding these extra charges is being responsible when using the available financing options and using these secrets to help you keep the cost of using loans in check.