Top Tips for First-time Borrowers

Tuesday, February 20th, 2018

If you need money – whether it’s by way a car loan, a home loan, or some other personal loan – being a first-time borrower can be a confusing time.

The variety of hoops some lenders make you jump through can seem stressful and if the access to additional funds is something that is quite urgent in your life, the waiting process can feel frustrating.

To help you understand what lenders need from you to make a decision about approving your loan, it’s handy to know some background on the loan application process – and what things you can do to help fast-track your loan application, without the stress.

Make Sure The Loan Fits Your Budget

Being honest with yourself about how much you really earn is a critical part of any loan application. The big mistake many first-time borrowers make is to over-commit.

Don’t let it happen to you and run the risk of damaging your clean credit rating. By talking to an experienced loan broker, you can find a loan to suit your needs, without stretching your lifestyle budget to breaking point.

Savings Count

That story about how you need a loan to create a great credit history – don’t believe it. Get a loan for the right reasons. If you want a perfect credit score, simply paying all your bills on time and having a great savings record will achieve the same thing.

Only Borrow For Something Real

Borrowing money for something tangible is critical. Applying for a car loan or mortgage helps you get your hands on a real asset. But borrowing money for a holiday? Sure, you’ll have fun but you might be paying it off for a long time to come – and at a price that is just not worth the stress.

Be Realistic About Your Lifestyle

Crunching the numbers might show you that you can borrow, but that doesn’t always mean you should. Be realistic by creating an honest budget that details exactly what is coming in – and going out – of your bank accounts each month. Loan repayments will impact your usual cash flow and if you don’t plan properly, that could get you in trouble. Taking advice from a trusted finance broker is the best way to get a clear picture of the realities of applying for a loan.

Use Loan Calculators As a Guide – Then Add Some Extras

Loan calculators can be handy tools to give you a rough idea of your borrowing potential, but you need to consider your actual financial situation and potential glitches to your income and expenses, such as something going wrong with your car and needing repairs, getting sick and being unable to work, etc. Using the information a loan calculator provides as a starting point is helpful but be thorough and cautious and allow yourself some wiggle room to ensure you can keep making repayments comfortably – just in case.

Think About Your Capacity to Repay Your Debt

Interest adds up and if yours is calculated daily, making more regular repayments on a weekly or fortnightly basis can save you money. If you can afford it, paying more than the monthly expectation makes a difference but talk to your loan broker first to see if your loan allows additional repayments or a faster repayment schedule.

Protect Your Credit History

If you have a debt – any debt – on a payment plan, it’s vital that you repay it and avoid the risk of having marks against your credit history. Every time you pay a debt late, you affect your credit history and this can impact on your ability to apply for loans in the future.

For more information about securing a loan for your needs, talk to our experienced loan specialists at Loans Actually today on 03 8805 1850

 


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