At one point or the other, you may find yourself looking for funding from lending institutions to bridge operation cashflow deficits, fund business expansion or for any other reason. The funding could be in any form or structure including instant guarantor loans from online-based lending institutions.
Irrespective of the lender, you must ensure that you always get quality funding that factors in all your unique business or personal needs. This is the type of funding that won’t cost you your long-term financial stability. In this article, we shall walk through a few guidelines to help you lock in the best credit solution in terms of pricing and repayment period.
1. Get Your Financials in Order
This may seem far-fetched, but it is a logical starting point to any loan application. Ensure your financial records-statement of financial position, revenue and expenditure, and cash flow statement, are all organized before you start any process with a lender.
For instance, even without running credit checks, your cash flow and financial plan will tell you spot on the size of the loan to apply for and the types of payments you can afford. Look at your projected income or cash flow over the period for which you need the loan facility to help you gauge your repayment ability.
2. Look for Transparent and Reputable Lenders
Performing due diligence is now easier than ever thanks to the Internet. Look beyond flashy promises of instant guarantor loans and websites to dig up the lenders’ real substance. Ideally, you would want a lender offering attractive single-digit annual percentage rates (APRs) and longer repayment durations.
One of the best strategies to help you evaluate your lender options is by looking them up on review sites such as Trustpilot or reputable online publications. Some online tools can use your credit checks to match you with a variety of lenders some of whom may offer loans with no origination or prepayment fees.
3. Seek to Understand the Loan Pricing Information
It is not uncommon for lenders to disguise their terms with jumbled up or misleading credit pricing information. For instance, some lenders may use “cost”, “factor rate”, or “general rate” to obscure the Annual Percentage Rate (APR).
As an example, your loan may be priced at a factor rate of 1.2. This means that if you are borrowing $10,000, you’ll have to repay $12,000 ($10,000 x1.2). This may look like a flat 20% interest rate, but when expressed in terms of APR, it could return a rate upwards of 35%. This is because APR includes additional factors like lender charges and auxiliary fees.
4. Watch out For Loan Restrictions
Some loans may come with covenants restricting their usage to certain purposes only. For instance, you may have a loan structured to help you consolidate credit card debt, replacing it with low priced credit. Other may be restricted to payroll only hence cannot be used to finance other expenses such as car maintenance or inventory replenishment.
Always read through the fine print or seek help in interpreting some of the unclear clauses before you sign on the dotted line.
5. Consider 0% Or Near Zero Balance Transfer Cards
Depending on how well you are doing on your credit card balance repayments and credit checks, you may have received credit card balance transfer offers. This can be a perfect type of loan if you have a solid plan on how to repay the balance within the introductory period.
However, before you move your credit card balance, think through the terms of the new card such as the length of the introductory period, any balance transfer fees, and the APR after the introductory period is over.
6. Work on Your Credit Score
Your credit score is the scale that lending institutions use to determine whether you get a loan, how much you get approved for, and the loan pricing. Start by getting your credit score report from credit rating agencies and have a look at your score. Even if the credit checks don’t show some really good score, you can begin improving on it gradually.
On Experian, having a credit score ranging from 721 to 880 is considered fair. A good score begins from 881 to 960 while anything from 961 to 999 is termed as excellent. Other credit scoring agencies you can get reports from are TransUnion and Equifax.
Some quick ways to improve your score include paying as much of your revolving debt as you can, paying your bills as they fall due, and ensuring any delinquent accounts are brought to current.
7. Ask For Pre-Payment Terms
Repaying your loan early can save you a lot of money on interest. However, not every lender provides for pre-payment. Even those who do may have certain conditions to be met including extra charges for early payments to help them cover for lost interest. Find out what the fees are and any other provisions that may apply if you decide to pay off your loan quickly.
8. Personal Loan Cosigner
Even if you have a poor credit score, you may still get approved for a loan. However, the interest rate on the loan could be way higher than expected. To avoid such incidences with instant guarantor loans, consider getting a cosigner with a great credit score. Lenders normally consider both credit scores- yours and that of the cosigner-when approving your loan. This will boost your chances of getting a bigger loan and at much lower rates.
9. Think Through Fixed and Variable Rates
Depending on where the economic cycle is, interest rates could be lower or higher at the time of getting the loan. If the rates are higher, getting a variable interest rate loan could benefit you as you may end up repaying the loan faster in future when rates go down. When the rates are lower at the time of getting the loan, locking in the rate with a fixed-rate loan could benefit you as that could mean lower interest rate payments throughout the term of the loan.
10. Go Short-Term for Faster Approvals and Repayments
Short-term loans are ideal if you need money quickly. Most instant guarantor loans are approved within a few minutes or a couple of hours. If the need is immediate, you don’t have to structure it as a long-term facility as this can drag your repayments and also attract high-interest rates. If you are a small business looking for small-ticket leasing equipment leasing or working capital loans, short-term loans are the perfect type of funding for you.
Getting quality funding from a reputable lender requires a little bit of work on your end. With many lending institutions offering attractive instant guarantor loans, doing your due diligence is a must. While having a poor score on your credit checks can be a tough hurdle to jump, with the right evaluation of lender offerings you can get a good funding deal.