A Guide to Your First Personal Loan
Life is full of unexpected situations. Many of them come and take us completely off guard. They could lead us to make quick decisions if we don’t have the money to resolve them.
Although, you don’t need to face an emergency situation to borrow your first personal loan. Since it also helps your make financial plans in your lives that you have been thinking about, a reality.
These types of loans that are used to meet a specific expense are called a personal loan. Personal credit or personal loan is a deal in which a creditor lends a certain monetary amount to a debtor. The lender is usually a financial institution.
The debtor must be a natural person, and who will have to return it accompanied by interest. There are plenty of purposes that you could take out a personal loan.
You can choose different types of loan reasons: studies, home renovation, travel, a large purchase, or a car, among others.
Sometimes, applying for your first personal loan is inevitable, but before deciding where to go or whom to go to to request it, it is important to evaluate some points, such as your purpose for the loan and your financial situation.
What are personal loans used for?
- Solve debts: On many occasions, the money obtained through a personal loan is dedicated to paying certain debts that have been acquired over time. Thus, the borrower manages to stop the growth of that debt. In this way, the payment of taxes and fines is one of the most frequent reasons for getting a personal loan.
- Buying a car: One of the requirements of many jobs is to have a vehicle. Thus, a personal loan can be an acceptable solution to be able to make the necessary investment or at least the first payment for the vehicle.
- Making home renovations: Budgets for home renovations are often quite high. Budgets are rarely accurate in cases of renovation, which as a general rule, tend to increase as the work evolves. Requesting a personal loan allows the investment to be made, reducing the economic impact on the family.
- Child-related expenses: The expenses that a family faces throughout the time of raising children are countless. Many families make use of personal loans, for example, to pay the fees for the school of the little ones in the family.
- Family holidays: Finally, holidays are also worthy of good economic planning. Thus, many personal loans are aimed at allowing families to have a few days of vacation in the desired place.
If the reason for your first personal loan is on this list, it is time to inform yourself of the steps you need to start the loan process, in this list you will find the places you can take into consideration for applying for the personal loan.
Where can I request my first personal loan?
Once you have decided to ask for your first personal loan, you may feel a little lost wondering where or whom you must go to to obtain this loan. It is important to have a quality and trustworthy lender so you must have a secure entity.
In the UK, there are several lenders that you can go to to request money, although depending on the different variables and your customer profile, you will have some that will adapt to you better than others. You can mainly go to the following entities:
- Banks: Both UK banks and foreign banks with representation in the UK offer you a wide range of personal loans.
- Savings banks
- Cooperatives of saving and credit
- Private lenders (private equity companies): The products that characterize this source of financing are fast loans or credits, mini-loans, and online loans.
- Department stores and supermarkets: These services do not provide loans in the form of cash, but rather finance the purchase of products. The great advantage it has is that the interest rate is usually 0% during the first months.
- Credit card companies supported by financial institutions
- Platforms that manage loans between individuals
Once you have found the best place for you to process your first personal loan, it is important that you inform yourself about the requirements that you must meet.
Here we bring you a list of general requirements that you can prepare before going in search of your loan.
What do I need to request my first personal loan?
Before requesting your first personal loan, you must take into account that you must meet a series of requirements.
Although each entity will have its parameters regarding the requirements that you must provide, you can consider this list and have these general papers ready to help you advance the loan process. Among them are the following:
- Be of legal age.
- Have a valid identity document (DNI, passport, driving license…)
- Explain the exact amount you need and the purpose for which you are going to use the money.
- Demonstrate solvency.
- Do not exceed your maximum debt capacity.
- Proof of income receipt. If you are self-employed, you will need to provide your self-employment registration certificate, the social security fee, or your last VAT declaration, while if you work for someone else, it will be enough for you to show your last two or three payrolls. If, on the other hand, you are not working, but you have recurring income, you must also prove it.
- Photocopy of your personal income tax declaration.
- Work contract. Sometimes they may ask you for a copy of your employment contract. Whether it is indefinite or not is one of the key things considered when the bank approves or denies your loan.
- Don’t be on any list of defaulters.
- No current debts with unpaid bills.
- Legal contracts for your house, rental agreement, declaration of assets, or sworn declaration of your assets.
First, you have located the best place to request your first personal loan and have collected all the requirements. Then, you can learn some tips that can help you have a much more satisfactory experience.
Read the following list of tips and avoid an unfortunate situation.
Which advice should I take into consideration for my first personal loan?
Now you have the information about what a personal loan is and how you can request your first personal loan.
You should also have some recommendations to keep in mind before requesting it and after you have done so. We advise you to follow these recommendations to have a satisfactory experience:
- Calculate the amount of money you need. Loan planning is an important part of the process. Take into account why you are going to need the loan and what the total amount of money is that you will need. This planning step will help you in not asking for more money than you can pay back. So, for example, if you need a loan to pay for a vacation, the ideal is for you to plan your expenses: costs of tickets, hotels, meals, transportation, among others. And from there, you get an approximate amount to ask the bank for. You may not spend everything you estimated, but the difference isn’t much, and so you won’t overpay for your loan, not counting the bank’s interest and commissions.
- Cost of interest and commission. It is important to take into consideration the amount of money you will ask for as your first personal loan since when you return it, the interest will make the amount higher than what you originally requested. Remember that you will also pay commission to the bank, depending on the number of months that you will borrow the funds for.
- Not all banks charge the same commission and interests. Experts recommend evaluating the annual effective cost rate of different banks and choosing the one with the lowest cost to reduce your debt.
- Remember to save money. Have provisional savings while paying off the debt can help you if you suddenly need funds, so you will not miss your monthly loan repayments. Start by saving 10% of your total income. It will be of great help if you face any financial inconvenience.
Taking these recommendations into account can mark a before and after for your financial experience when requesting a personal loan.
So, try to take them into account before requesting your loan. You can cover your back by being informed with these tips about things that can go wrong.
Since you have this information, it is up to you to take the first step. We recommend following these tips so you can have a satisfactory experience with your first personal loan.
You can carry out your plans safely. It never hurts to ask for a little help to start something big.
Need some extra cash to get started?
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What is the easiest place to get a personal loan?
Ratewise is the easiest place to get a personal loan because we help you search the market and find the best certified lender for you.
How many personal loans can you have UK?
How many personal loans can you have in the UK? That depends on your financial situation. You are certainly able to take out more than one loan if you have the financial ability to.
If you are borrowing through the same lender however, it may be simpler to consolidate your payments to make sure you don’t miss any.
What is the easiest loan to get?
The easiest loan to get is a secured loan. This is because a secured loan comes with the condition that you put some of your property up as collateral during the loan period.
What is the minimum credit score for a personal loan?
The minimum credit score for a personal loan is dependent on your lender. With Ratewise we find you a certified lender who can work with your situation and help you build your credit score if it isn’t quite high enough to get your desired loan.