There are lots of questions that you should be asking yourself when you are considering a loan and cost could be one of the main one. It is important to think about value for money really, rather than just cost though. You need to consider what you want form the loan and find the one that matches this for the best price. However, you will still need to be aware of the cost in order to make this assessment. It is a good idea to methodically work out whether it is too expensive for you as part of this process.
How Much is it?
The first thing to do is to work out the cost of the loan. This might seem obvious initially, but may not be as easy as you think. It can be tempting just to look at the interest rate and assume that the loan with the lowest rate will be the one that is cheapest for you to use. However, this will not be the case necessarily. Interest rates can be rather complicated. This is because the interest rate can be set up in different ways and how much interest you actually pay is determined by how long you have the loan as well as the rate. The reinterest rate might be the APR which is the annual percentage rate, however, it might be the AER which is the rate which allows for any fixed costs as well. There might be administration fees which have to be taken into account as well as other costs and so you may end up paying more than just the interest. It is therefore very wise to fid out exactly how much it will cost in monetary terms. You may be able to find this out using a calculator on the lenders website but it could be easier to just ask the lender to work it out for you.
What are the Repayment Expectations?
As well as thinking about the cost of the loan, you need to also consider whether you can afford the repayments. This is really important and with a short term loan it can also be more tricky. This is because you will find that the you will often need to repay the whole amount that you owe, both what you borrow and the interest and fees. You need to check this and find out how much you will be expected to pay and when and then you need to give it some thought.
Can I Afford Those?
It is really important to make sure that you will be able to afford the repayments. You might think that you will be able to as you will be repaying on the day that you get paid. However, you must not ignore the fact that you will also have other things to pay for as well. It is likely that you will have bills and things like that to pay that you will need to find the money for. You will also have things to pay for through the month such as food as well. Therefore, you will need to make sure that you add up everything that you will need to pay for and make sure that you will be able to afford them based on your income. If you cannot, then it might be possible to cut down on some things to get some extra money. Cutting back on luxuries is worth it but also seeing if you can pay less for the essentials that you are buying now can also be worthwhile and fairly easy to look into.