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Getting a Personal Loan: Private Lender or Bank?

There are many different places where you can get a personal loan, but you will need to be careful about what you decide. These days more and more people in the UK are getting their personal loans through private online-based lenders. Banks are also a popular option for loans, but which one is right for you? This article will help you choose the right option to match your needs. The lender you decide on for your loan will affect a lot of things, so you don’t want to rush into a decision.

Borrowing from a Bank

A lot of people still go to banks to get personal loans, and there are some good reasons for that. Banks are generally very reputable financial institutions, and their money is backed by the government. One of the main drawbacks of going to a bank for a loan is that you might not get approved if you don’t have good credit. Most banks have fairly high standards when it comes to how they will approve for even a small loan. This is one of the reasons why so many people are turned to private lenders online.

Borrowing from Private Lenders

Borrowing money from a private lender can be a good idea as well. Many private lenders have popped up online in recent years, and they have a lot of amazing deals to offer. A lot of people are applying for loans with these lenders because they are so easy to get. Even people with horrible credit can get approved for a personal loan online. The catch is that sometimes the interest rates can be pretty high.

Borrowing Amounts

Banks typically only give out medium to large sized loans, while a lot of private online lenders give out smaller loans. If you only need to borrow £50 to £500, an online lender could be the way to go. In fact, you might not even be able to get this size loan from a traditional financial institution.

Reputation

While you might be tempted to borrow from a bank because of their established reputations, there are plenty of trustworthy and legitimate private lenders. If you do want to get a private loan, however, you will need to do your research. It is crucial that you take enough time to find a lender that is completely legitimate and licensed. Make sure that you get proof of the lender’s credentials before choosing a certain one. A lot of people are hesitant to borrow from private lenders because they assume that they are all shady and untrustworthy.

The Loan Process

The process of obtaining a loan from a private online-based lender is definitely more expedient than going through a bank. The fact is that bank loans can take up to three to four weeks to process, depending on the amount. You can get an online loan from a private lender within as little as 24 hours. Those who are in desperate need of cash should consider going through a private lender for this reason.

Both bank loans and private loans will require you to fill out an application. Lots of banks have online forms for loans, but they typically take longer to complete. A standard online application for a private lender is fairly basic and only takes around 15-20 minutes to fill out in full.

When you submit a private loan online, you will hear back from the lender via email. If you get approved for the loan, you will be sent a contract to put your digital signature on. It is important that you take the time to read through the contract before signing. You won’t be able to get the money until you sign the legally-binding document.

Repaying the Loans

Private lenders are usually more flexible with repayment than banks. That is to say that they typically do not charge for early repayment, though it does depend on the lender. Banks usually impose very strict guidelines for repayment, which can make repaying the loan a hassle.

Fees and Charges

You could end up paying more for a bank loan than a private loan because of all the additional fees and charges. A good private lender charges minimal fees to make it easier for the person to repay their debt on time. Many banks force borrowers to pay a multitude of fees, which can quickly add up.

Should I get a loan from a Bank or Private lender?

There are a few factors to consider before deciding where to get your personal loan. If you are in a hurry for your money, a private lender is probably the better option. If you have a very good credit score, you might want to consider going with a bank. Private lenders tend to be more flexible and amenable, which is something to keep in mind before making a decision.

The Most Damaging Side-Effects of Bad Credit

Bad credit can be extremely damaging for anyone, and it’s important that you know how. There are quite a few potentially negative side-effects of a low credit score, and it can impact a lot of aspects of your live in a bad way. The more you learn about how important your credit score is, the more serious you are likely to be about maintaining it.

Higher interest rates on loans and credit cards

The fact is that having bad credit can be a huge deciding factor when it comes to how much credit you pay on a loan or credit card. Nobody likes having to pay a lot of interest, and the better your credit is the lower your rate is going to be. A low credit score almost always means paying a higher interest rate, and it’s important to keep that in mind when applying for a loan or credit card.

Being turned down for a loan

A lot of people with bad credit get turned down for loans when applying. While it’s true that having bad credit doesn’t necessarily mean that you won’t be able to get the loan you need, your options will definitely be more limited than if you had good credit. Those who have bad credit tend to have more difficulty when it comes to getting approved for loans, simply because lenders usually view them as liabilities.

Difficulty getting approved for an apartment

When your credit score sinks low enough, you might also find that it’s difficult getting approved for an apartment that you are interested in moving into. These days most apartments run credit checks on applicants, and having bad credit can mean not being able to find a decent place to live. Bad credit might not always stop you from getting approved for an apartment, but chances are you will have trouble getting into some of the nicer places.

Having to pay a security deposit on utilities

Some utility companies make those with bad credit pay a deposit in order to take advantage of the services they offer. This is not true of all utility companies, but more and more of them have started doing this. The size of the deposit that you will need to put down will depend on the company itself as well as just how bad your credit is.

Trouble getting a cell phone contract

Some cell phone service providers are hesitant to allow someone with very bad credit to sign a contract with them. These days a lot of these companies run credit checks on those who are interested in taking advantage of the mobile phone services they offer, so you will need to keep that in mind as well. Although there are firms who offer payday loans with no credit checks, you might be required to make a deposit in order to get a contract if your credit is really bad.

You could get turned down for a job

A lot of bigger companies, especially those in the finance sector, are starting to run credit checks on potential employees. There is definitely a chance that you could get your job application rejected if you have poor credit. Some employers view bad credit as a sign that the person is not dependable or responsible.

Higher Insurance Premiums

If you have bad credit you will also likely pay more for your insurance each month. When it comes to auto insurance, bad credit can really drive up your monthly premium. The better your credit is, the lower your premium will likely be. There are a number of different things that can impact your premium amount, and your credit score is definitely one of them.

You will definitely want to make a point of knowing what your credit score is by checking once a year with the three major credit agencies. By doing this you will know what your chances are of getting a loan or reasonable interest rate on a credit card. It’s also a good idea to start improving your credit as soon as possible if it’s gotten bad. The more you improve your credit, the easier your life will be overall. You will certainly be glad that you took the time to do this.