The financial institutions including high street regular banks, societies and direct lenders offer to lend for almost every need- small, or big, short-term or long-term. Each lending has a cost- low or high. Borrowing has become the necessity of common households facing complex diverse financial problems because of the weak economy of the countries. The uncertainties further make the financial constraints more complex. When all the leading banks demand lots of formalities besides a good credit score, private lending agencies don’t go into the details of borrowing reasons or the reasons for having a bad credit score. Quick cash loans from the direct lenders are easy to avail but the cost may affect your financial comfort for longer; therefore, you should avoid taking loans in certain conditions. What are the conditions or purposes when you should avoid long-term or short-term personal loan?
Here are 4 common conditions that may trap you in lending net:
- Loan for holiday Vacation: Going on holiday vacation is a necessity to get yourself relaxed from the busy schedules. Numbers of private lending agencies offer bad credit personal loans for holiday tours or for a festive celebration. If you don’t have enough cash to afford such pleasures, getting a direct loan is not the right choice always. Vacations are the time to rejuvenate yourself and to spend quality time with family or friends but not to complicate the life with worries of loan repayment. Unless you don’t feel in a position to repay the loan instalment on time each month, think twice before taking a loan. It might be important to go on a trip and to create lifelong memories but it is not worth to add financial stress.
Solution: Plan for a shorter holiday gateway close to a hometown that your financial condition allows.
- Loan for Wedding: No doubt wedding is the biggest day of life; everyone wants to make it the biggest as per dreams and mutual plans. Budget marriage can also deliver the same pleasures. Direct lenders will never hesitate to lend the required money even for 24 months or 36 months but the monthly cost will snatch part of pleasures. For example, my friend living in Brighton got married in 2017. As he was full of dreams like all of us, he borrowed £ 3000 as personal loan despite not having good credit score report. Naturally, the loan because of poor credit score was at high APR. Everything happened smoothly for a couple of months but he lost the job suddenly. The problems started. Even after almost two years of paying the instalments, he still owes almost 70% loan amount to payback.
Solution: Don’t let the fairy dreams for marriage snatch your financial comfort; wedding event planner may help you plan better in the permissible budget.
- Debt-to-income ratio is high: According to a report by the National Audit Office (NAO), 8.3 million people owe debts and pending utility bills. The inflammation rate during 2018 2nd remained high comparative to salaries hike; therefore, households are going to have fewer funds for loan repayment. If your debt-to-income ratio is too high, don’t plan for private borrowing. It is the ratio that reflects how much you can afford to repay each month consistently over the entire repayment period. The most of direct lenders take 43% as the maximum limit for reasonably priced lending. The income should be stable with a possibility of growth.
Solution: Avoid borrowing if you have a debt-to-income ratio of more than 43%. If it is essential, minimise the required amount and repayment period.
- When you are jobless: The sudden unemployment is common for most of us especially for the people working in SMEs. As the businesses are getting more conscious for the predicted outcomes after Brexit, job insecurities are increasing in the private sector. When you are without a job, getting red flag marks on the credit score report is natural. The government registered direct lenders offer unsecured unemployed loans even to the bad credit score holders but at a high cost. Even if you get a job after a couple of months, the financial worries to repay the mounted loan amount snatch the sleep.
Solution: Don’t take unsecured bad credit unemployed loan, unless you are sure of getting the job again. Exploring the scope of getting job seekers allowance is also a way to avoid borrowing at a high cost. Even if you are on job seekers allowance or Govt. benefit, you can avail no guarantor unsecured loan from direct lenders but it will cost less because of less amount required.
The direct lending industry is trusted to be the best-organized business sector buyers the statistics reveal that high numbers of borrowers fail to repay on the time; as a result, they continue to pay. Don’t let yourself trapped in unaffordable borrowing; instead, focus to find the affordable solutions to meet out the short-term finance requirements.