Are you new to loans? This article is designed to help you understand all available options and guide you towards a good offer. It’s a 4 minute read and in the end, you’ll know exactly what to do next.
What do you need the money for?
Obvious question, right? Well, make sure you’ve wondered if you really need the money. Often, saving for something is a much better option and there are some savings products that provide reasonable interest rates. Learn more about your savings options here.
If saving is not an option, then a loan could be the right option. Here in Good Finance, generally, 1 in 3 of our clients uses a loan to finance the purchase of a new car. Our clients also use loans to finance home improvements or buy something that normally exceeds € 2,000, such as vacations or something for the home.
Different types of loans
If you are going to apply for a loan, it is important to select the right type of loan, since there are different options available and not all of them may be suitable for your personal circumstances.
A personal loan is one that is issued by a bank to ask for a certain amount of money. These personal loans are advertised with a APR that can make them look like a good option for you. The main reason for this is that a personal loan is usually given only to people who have a very good credit score, since lenders consider them a lower risk for them. You can check if you will be eligible for a personal loan using a service like Good Finance.
A secured loan is one in which you borrow money against something you own. This would mean that, if you do not keep the repayments, the lender can assume ownership of the asset you present as collateral. In most cases, the asset presented is a property. These loans are generally used to borrow more money than a personal loan. We suggest that you seek independent advice before taking these products, you should consider speaking with a financial advisor or a charity.
A payday loan is a short-term loan whose goal is to pay within your next payday. These have a charge associated with them instead of an interest rate. Payday loans can be expensive, for example, you can be charged € 25 to borrow € 100 until the next payday, this means you would be paying € 125.
Debt consolidation loan
A debt consolidation loan is one that is made to help you pay off a variety of debts with different lenders by transferring the entire debt to a single payment. Instead of having to pay the various debts at the end of the month, you would only have to pay one. The amount you pay each month may be less due to the interest rate than having to pay several debts.
A guarantor loan is where, if you have a low credit score, you need to ask another person to become the “guarantor” and agree to pay the debt if you cannot do so. The guarantor should have a solid credit history. Guarantor loans usually come with high interest rates, but timely repayment means that your credit score will improve.
If after reading this article you still believe that a loan is the right product for you, be sure to look for a product that meets your needs. We can help you with that, just start here!