Does Overdraft Affect Getting A Loan
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Taking on a loan is a major financial responsibility. Here are some of the important things you need to think about when you choose to borrow.
First of all, consider whether it is absolutely necessary to take out a loan for the amount proposed?
As an example, if you long for a new car since your friends have purchased one but there is nothing wrong with the one you've got do you truly wish to have the pressure of this debt around your neck?
If you reply with a 'Yes I would still like a loan', then keep on reading.
If you think 'No', well done, you are ahead of the class and can have the rest of the day off!
So now, you still would like to take out a loan. Have you thought of other options to having a personal loan?
For example, should you have enough money in your bank account, why not dip into it? The sum of money you could have made in interest on the money in your savings account will be less than the money you would have had to pay in interest on the money you borrowed, as loan interest rates are higher than savings rates. Nevertheless, make sure you continue to have some savings set aside - the best would be in a tax-free account like a cash ISA - where you are unable to easily 'touch' your savings.
You could also think about borrowing money against your property, by increasing your existing mortgage. The interest rates on mortgages are almost always lower than those offered on loans, so it could be a more cost effective way to borrow money. However, know that if you are not able to meet these newly increased repayments monthly, you could possibly lose your house.
Finally, when the loan is for a little amount and/or short-term, then why not look into a bank overdraft or maybe a zero percent interest credit card?
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