Personal finances are being stretched to the limit as families and individuals struggle to cope with the rising cost of living.
Inflation has risen to a 19-year high as the rate jumped from 4.5% in August to a staggering 5.2% in September. This rate of increase has not been seen since September 2008, when oil prices skyrocketed to new records at $147 per barrel.
This time around it’s the sharp increase in gas and electricity which have ramped up the rate of inflation. Household bills have soared, savers are losing money, and on top of that unemployment has reached a 17-year high.
Sir Mervyn King, the Bank of England Governor, recently declared that the world is facing the worst financial crisis in its history.
Considering all of this, it comes as no surprise that people have turned to credit cards and personal loans to get by. Whatever your reason for borrowing, here is a quick guide on how to borrow £5,000.
Get a credit check
Before you start asking lenders for money, it is advisable to get a credit check. If you have a bad credit history you may be turned down and this may have an impact on your ability to borrow money in the future. By getting your credit checked you could smooth out any issues before taking on a loan. Get your credit report for free.
In order to sort out any bad credit you must cancel any unused credit cards. Lenders typically look to see how much money in total you could borrow and this is known as your ‘debt-to-available-credit-ratio’. Simply put, the higher the amount of money you have access to, the less likely you are of making a successful credit card application.
Applying for countless credit cards and loans could also make your credit worse. This is because every time you apply for a card, a credit check will be performed by a potential creditor, leaving a record on your credit history. This could deter some lenders from your record.
Lenders like to be safe in the knowledge that you have the ability to pay back money. Therefore, it is important that you pay off any outstanding debt as this could dramatically improve your credit record. Before applying for a loan or credit, pay off any mobile phone bills, heating bills etc.
How much do you really need to borrow?
Consider how much you really need to borrow, and don’t borrow more than you need. Biting off more than you can chew may land you in debt or at worst facing repossession, court fines and even jail.
Do you really need that little bit extra to treat yourself? If you cannot afford to pay it back, don’t do it. During this economic climate, it may be tempting to treat yourself and splash out a bit. However, it is important to remember that it is borrowed money which will eventually have to be repaid.
When borrowing credit it is vital that you remain realistic about what you can pay back and when. Look at your finances and consider what you can afford to pay back each month. If possible, pay more than the minimum back. This will save you money in the long run and help you to clear your debts sooner. In some cases it could also help to improve your credit score.
Consider your loan period and how long you wish to spend making repayments.
Shop around for the best deals
The market is extremely competitive at the moment and there are many deals widely available to consumers. However, it is important to get the best APR for your loan, especially while interest rates remain low. Compare high street APR’s but also be aware of online deals. Some lenders and brokers may offer deals at cheaper rates which you may not find on the high street. Seek advice from the broker as they can help you to search for these alternative deals.
Compare personal loans with Propertywide
Lending with a partner
If you are looking to borrow a large sum of money for home improvements, a car, a business start-up or even a wedding, why not look into lending with a partner? It may make it easier to be accepted in the eyes of the lender if you are both taking on credit. Joint loans are attractive to the bank given that each one in the contract is individually liable to repay it.