When young adults move into their first apartment, start their first job, or become students, they often find themselves seriously struggling with money. Being able to get access to all of the cash you need can be extremely difficult when you don’t have any assets, and you’re just getting started in life. Because of this, some younger people turn towards the idea of loans to help them get through the first stages of their independence.
The first thing to understand is that when you want to pick a loan, there are several different solutions to choose from. If you are a student, you’ll probably find that a student loan has the lowest interest rate, and you can start repaying it after you have started working – which removes some of the stress from your shoulders.
There are also a wide range of personal loans available from a variety of lenders. However, before you pick any particular lender to deal with, you should take the time to plan out your needs and think carefully about how much you’re going to need to borrow, and what you can afford to send back to banks or building societies in the form of repayments each month.
Deciding on the Ideal Loan
As a young borrower, the last thing you want to do is borrow more than you can handle and end up overstretching your finances. Not only will this place you in a difficult position immediately with debts and repayment problems, but it will also have a negative effect on your credit rating – and the history that will follow you for the remainder of your life.
Think carefully about what you need to do with your borrowed money, and cautiously look for a loan opportunity that you can afford to pay back every month – without fail. For instance, you might want to use your first loan to purchase a car so that you can get to and from work. By taking a loan out from the bank, you will be expected to pay back the amount you have borrowed in segments over time, along with the interest on that amount. If you don’t stick diligently to your repayment plan, you could have to face serious charges and fines.
Keep in mind that in most circumstances the more you borrow, the higher the interest rates will be. In the same vein, the higher your interest rates are, the longer it will take for you to repay the loan, and the more you’ll pay to the bank or building society in terms of interest.
What if you Have Bad or No Credit?
First of all, remember that there’s a big difference between having bad credit and having no credit. However, no matter which of these situations you find yourself in, the chances are that they will make it tougher to get the loan you want with the interest rate you would prefer. If, as is the case with many young borrowers – you don’t have any credit rating behind you at all because you have never taken out a loan, then your banks and building societies can’t be sure whether you have any good habits or bad habits with paying money back. Alternatively, if you have a bad credit rating, this could be because you have suffered from bankruptcy, CCJs, or simply missed some repayments on the last loan you took out.
Though having bad credit or no credit can make applying for a loan successfully far more difficult, it’s also worth noting that this doesn’t necessarily mean you won’t be able to get the cash or credit that you need. Instead, it simply suggests that you will face higher interest rates and access to smaller loans. The reason for this is that the most valuable loan deals are reserved for those who have the best credit histories, as well as a stable job that ensures they can make repayments on time every month.
Improving your Credit Rating
If you want to improve your credit rating and therefore improve your chances of getting a good deal on your loan, then there are plenty of great ways to do this, from making sure that you are included on the electoral roll with your local government, to ensuring that you always pay off your credit card bills on time. Make sure that you have a plan of action ready for when you get a loan that ensures you will always make repayments according to the schedule that has been set for you. The more reliable you are with your payments, the quicker your credit history will begin to develop at a positive level.
Also keep in mind that even if you do have a bad credit history, your credit rating isn’t always the only factor that lenders will consider when they choose where or not to lend you money. They’ll also need to think about your salary and any other assets you own.