If you’re in need of some financial help, you have likely looked into various options and have made the decision to get a loan to support your future plans. Loans can make it easy for you to fulfil your business or personal goals and reduce your financial burden. However, before applying for a loan, you should carefully calculate the required amount and ensure that you can make regular repayments.
In this article, we have compiled a few tips which can help you to work out how much money you can sensibly loan.
How will you spend the loan amount?
There comes a point in most of our lives where we cannot meet our goals or expenses with personal savings. Whether it is for business or personal purposes, you might need to apply for a loan to move forward. However, it is important to carefully plan how you will spend the money. For instance, if you want to take a loan for your business, will you use it to hire a new employee or update your office equipment?
Similarly, if it is for personal use, how do you plan to spend it? The amount of money you need for a new car will be more than what you require for redecorating your house. However, it is also important to keep in mind that you will have to repay the loan eventually. This means that you should not apply for a loan amount that you cannot possibly pay off.
Do thorough research
Depending on the lender, you will be offered different interest rates and loan plans. There is a possibility that you will find some companies who are willing to offer you more than what you need. For instance, do not opt for a £10,000 loan when you only require £5,000. A higher loan amount will also mean more monthly payments – hence, it is important to stay focused on your goals. Carefully choose a loan plan which suits your needs and does not carry a high interest rate.
Use a loan calculator
An online loan calculator will provide you with a breakdown of the entire payment schedule i.e. the amount you need, the amount you should be saving and the amount you are expected to pay at regular intervals. Loan calculators are a helpful tool which can assist you in making an informed decision. You will have an idea of how much you can borrow and repay based on your monthly income. You can also use an online loan calculator as many times as you want to calculate your repayments. If you’re looking for a loan calculator, try this one by 118 118 Money: https://www.118118money.com/money-guidance/financial-tools/loan-calculator/.
Choose the right lender
It can be difficult to pick the right lender. However, you choice of lender also depends on the type of loan you want to apply for. Some companies offer great deals on car and home loans, whereas others are perfect for business loans. Hence, it is crucial to carefully research your loan options to know which lender/source is the best for you.
Stay in limit
Whether you want a business or a personal loan, it is important not to go overboard. Do not borrow more money than you need. Depending on the lenders’ criteria, you might even qualify for a loan of £50,000 while you only require £10,000.
However, a bigger loan also means more interest rates and a higher repayment amount. Remember that the more money you borrow from a company, the higher your monthly payments will be. Thus, request for a loan which you can easily manage to repay.
Opting for a minimum amount loan is the best choice. Having more money might seem tempting at first, but it comes with its own pros and cons. So long as you conduct enough research, get some advice and calculate your loan correctly, you should be able to avoid any issues.