Should I get a loan? What to consider before applying

Understand your needs 

Before you apply for a loan, it’s important to ask yourself these questions: 

• Why do you need the loan? Be clear about your reasons. Is it for something essential, like home repairs or an emergency expense? Or, is it something less urgent that you want instead of need?
• How much do you need? Only borrow what you require. It’s tempting to take more, but remember, you’ll have to pay it back, plus interest.
• Do you have any other debts? It could work out cheaper to include the amounts of any existing debts into your loan (known as debt consolidation). You could then pay these off with the new loan, and be left with one payment, to one lender, with one interest rate. 

Review your finances 

Next, take a good look at your finances. This will help you understand whether you can afford the loan. 

• Can you afford the repayments? Look at your spending and remember to account for seasonal and annual outgoings (like Christmas and birthdays) which may not be included in a typical month's bank statement. Make sure you can afford the monthly repayments comfortably. 
• What’s your credit score? Check your credit report to see your score, and make sure everything on it is accurate. A good score can get you better interest rates and increase your chances of being accepted for credit.  

Think about the future 

Whilst impossible to know what the future looks like, it can be wise to consider any change in circumstances, and plan for them where you can. This can reduce any stress involved when it comes to future repayments. 

• Job security: Are you confident in your job stability? Losing your income could make repayments difficult, so make sure you’re not overstretching yourself. 
• Emergency funds: Do you have any savings to fall back on if something unexpected happens? Keeping aside a small fund can give you some breathing space if an emergency occurs. 

Do your research 

If you’ve decided a loan is for you, it’s worth looking into your options. There are many different types of loans out there, so it’s important to compare them and find the one that fits your needs.  

• Loan types: Depending on your circumstances, you could get both secured and personal loans. Each come with their own benefits and drawbacks, so consider these carefully and how they would fit your situation. 
• Repayment period: This is called the ‘term’ of the loan. Spreading your repayments over a longer term reduces your monthly payments, but it also means you’ll be paying more in interest over the course of the loan.
• Interest rates and fees: Compare interest rates and any fees involved. A lower interest rate can save you money in the long run.
• Fixed or variable rates: Fixed rates remain the same throughout your loan, so you’ll always know how much your payment will be each month. Variable rates can change, meaning your payments could go up or down. Take time to decide which is better for your situation. 

Use an eligibility checker 

Once you’ve found a loan that looks right, use an eligibility checker before you make a full application. Eligibility checkers are a great way of seeing how likely you are to be accepted for a loan, before you apply. Unlike a full application, they do not require a hard search of your credit report, so don’t affect your credit score.  

Simply answer a few questions, and within minutes, you’ll have a better idea of whether or not you’ll be accepted for the loan.  

Seek advice 

If you’re unsure about anything, it’s always a good idea to seek advice. 

• Talk to a financial adviser or trained specialist: They can help you understand your options and what’s best for your situation.
• Read reviews: Look at what others have said about the products. Good customer service and clear terms are important.
• Get in touch: If you have any questions about the terms of the loan you’re applying for, you can ask the lender. If you’re applying for a loan with us at Ocean, our customer service team will be happy to help.

Should I apply for a loan? 

Before taking out a loan, make sure you’ve thought it through and understand what you’re agreeing to. Remember, only borrow what you need and ensure you can afford the repayments. This way, you can avoid financial stress and make the most of your loan.