Why You Shouldn't Apply for Big Loan!
Do you need a little quick cash urgently? You know you can have it now with a loan from your local credit union. That's not the problem here. The real problem is you! YES, YOU!
Let's say you need £250 to repair your car, in general. Why, on Earth, would you apply for £2500 big loan? Can't you see the difference?
It makes a huge difference, how much you pay back, and how much interest you add on! You lose more than you win. Let's put that into perspective with those representative examples:
Can you see the awful difference? Because you can apply for a big loan doesn't mean you should! Look at how many months you would be stuck to pay back that big loan.
Here is the trickiest part. Representative APR will be set as per the amount you want to borrow. In our example it shows how it is high for the lower borrowing amount, but look at how much you will be charged in interest just because "you can borrow more" attitude.
Timewise, you can just repay in 9 months and be free of that debt or pay it in 3 years where you already have spent the money and cannot have another loan if your fridge broke down, or your phone falls apart, or you need a new appliance, etc. Have you thought about that when you applied for the highest you could have?
When you decide to take a loan, focus on how much you need, lowest amount of interest in pounds (not percentage) and how much you can afford per month after you know you won't be out of pocket. That's first step.
On the other hand, most of the loans getting rejected are because people apply for big loan which is more than they would be approved for. So be smart when you apply for a loan, make the best out of the least. Get your car repaired, pay off in short time, apply again when you need, pay off in short time and so on. That is how you get loans to work for you and you stay on top of your expenses. You are buying what you need with loans. Never apply for more than you need.
Test the borrowing theory using our new calculator.