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Apply for guaranteed loans
  • Emma Parker
  • June 15, 2019

Online lending industry has introduced several loan offers that majority of borrowers get discombobulated while deciding which one they should take out. All small loans serve the same purpose – tide you over during emergency – but all are different in size, term and interest rates. Before you grab any offer, it is imperative that you understand features of all loans.

If you have ever studied the types of debts, you must have come across guaranteed loans UK. What is it? Is this a loan that requires a guarantor? No, these loans have nothing to do with a guarantor. These loans are promoted as guaranteed approval and hence known as guaranteed loans. These funding sources target people with poor credit history who want immediate cash to finance their needs.

You can apply for these loans when you need a small amount of money and you cannot qualify for personal loans. A lender will not turn down your application even if you are a subprime borrower. All you need is income source to prove your repayment capacity. These loans come with no credit check, which means you can get money in your account very quickly without wasting your time in hard inquiries. However, easy approval does never mean easy repayment.

Factors you should consider while taking out guaranteed loans

Guaranteed loans come for very short period that cannot go beyond a month. It is important that you carefully opt for the deal or else you will end up falling into a permanent circle of debt. Here are some of the factors that you should consider:

Interest rates

Each lender charges different interest rates. Since your credit file shows a high default risk, you are likely to be charged higher interest rates than borrowers with good credit history. Your finances can disturb if you choose an expensive deal. Before you grab the offer, you should compare interest rates.

The purpose of borrowing money

A loan can never be a cheaper deal because you have to pay interest on top of the principal. If it can help you tide over, it can also hurt your finances if you fail to handle it carefully. You should borrow money only when it is very urgent. If you are taking out to make impulsive buys, you are going to take a toll on your budget. Guaranteed loans are short-term loans, so you can finance only small expenses such as paying medical bills, credit card bills, utility expenses, car repair etc.

Your borrowing capacity

Now that you have come to know why you need money. The next step is to determine how much amount you can borrow. If you do not analyse your affordability, you will end up with a debt cycle. Create a budget to take stock of your cash outflows and inflows. Add in all expenses, even little expenses to know how much money you are spending every month. Deduct the total amount from your total income to see how much you are left with. You will use that amount to pay off your loan. Make sure that your expenses are lower than your income if you want to borrow money. Use online calculators to know the total cost of your loan. If the total cost of the loan does not exceed your monthly net worth, you can apply for the loan.

Hidden fees

A loan does not become expensive only due to interest rates. They include various types of fees like processing fees, late payment fees (in case of default) and prepayment penalty (if you pay before the scheduled date). Processing fees is very nominal, but late payment fees add up to your financial burden.

When you make a default, the lender also charges interest penalty due to which it continues to mount up with every default. For instance, you have borrowed £100 on which you have to pay interest of £30. If you make a default, you will pay late payment fees along with £30 (interest charge).

Some lenders charge prepayment penalty when you pay before the scheduled date. However, not all lenders charge any fees even if you pay earlier. You should ask your lender before signing the contract about these fees.

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