What you absolutely should do before getting a loan.

Life is unpredictable! It has a terrible habit it throwing something huge and expensive in your way and loves nothing more than keeping you out of the pub. Cars breaking down, washing machines blowing up or moving home can often leave you in the position where you may need to look at borrowing some money in order to pay for it. Alternatively you may need that extra finance to make the home improvements you’ve been planning for ages or perhaps to buy the new car you want. If you find yourself in one of these situations, then take a gander at these five golden rules for getting a loan.

They are a necessary evil but your monthly bills are biggest thing you need to consider before getting a loan. Making sure that all your current commitments are up-to-date, manageable and paid on time is a must.

If you can’t manage your current necessary bills such as rent/mortgage, council tax, utilities and food then getting a loan isn’t going to help. You should NEVER take out a loan to help assist you with day to day bills – a loan should be used to cover a larger purchase, for example, and you should be able to meet the repayments AFTER all of your necessary bills have been paid on time.  

The last thing you think about when you turn 16 or move house is making sure the government know but getting your name on the electoral register is a must in order for you to actually get the loan.

Popping your name on the register helps the loan company confirm who you are, otherwise it looks like you don’t exist or you’re starting afresh with no credit history; both could have a negative effect. Many people assume that they’re automatically registered but this isn’t true – you need to inform them that you want to be on the roll, for more information and to register visit https://www.gov.uk/electoral-register/overview

Sounds silly I know but making sure you can afford to pay the loan back each month is vital. Look at your circumstances, are you in a position to make the repayments – even if something goes wrong? If you’re in a stable job, with a guaranteed income with all your bills easily met each month then you’re in a better position than if you’re on a zero hours contract not knowing if you’ll have work one week to the next.

If you lose your job, go off on sick or on maternity leave do you have a back-up plan for making sure these repayments are met? Not making the payments can have a serious effect on your credit rating. Your credit rating doesn’t just affect how much money you can borrow, some jobs also require you to have a reasonable credit rating as you may be open to bribery in the position; roles that deal with credit and the police force for example.

Loans tend to be aimed at large sums over long periods of time, look at the purchase you are making to see if a loan really is the best option. If you’re looking at purchasing a car, then car finance might have the better interest rate for the amount and repayment period. If you want to know more about when personal loans are a good idea - click here.

If you’re looking at a smaller amount such as £300 for a washing machine, then a credit card or loan from a family member might be a better idea. Don’t go to payday lenders as they have a ridiculously large interest rate and having a payday lender on your credit report can have a bad effect. Another thing to consider is APR...  Umm, APR? Don't worry, we've got your back - click here to find out more.

If you decide to go for the loan, make sure you plan when the money will leave your account. Have them come out on, or as near to payday as possible. This ensures the payment is made and you don’t have to worry about the making sure the payment amount is still available half way through the month. You can normally choose your own repayment date or have a choice of dates so always go for one as close to payday as possible.

The main thing you need to do before getting a loan is to think it all through; make sure you need it, you can afford it and you can get it. Take some time to go through your options so you get the best deal for what you’re wanting and get yourself registered on the electoral roll.