Before you take out a loan

The checks worth doing before you sign anything, so the payment still fits in a bad month.

A loan is only affordable if it survives an ordinary bad month, not just a good one. Test the payment against your real numbers with the Can I Afford This? calculator, and see what paying a little extra does to the total with the Extra Payment Calculator.

Understand the offer

Read past the headline rate before you compare anything.

Read the whole agreement, not just the advertised rate
Establish whether the rate is fixed or variable and what moves it
Check which fees are added on top of the amount you receive Arrangement, administration and insurance fees all raise what you repay.
Ask what happens if you clear the loan early Some agreements charge for settling early and some do not.
Check how long the term runs and what the payment looks like near the end

The true cost

Compare on total repayment, never on the monthly figure alone.

Add every fee to the amount you repay before comparing offers
Price at least two offers on total cost side by side
Confirm whether the payment is fixed for the whole term
Ask what happens if a payment is late or missed
Work out the interest you would pay over the full term
Check whether an optional insurance or protection product has been added optional

Your own numbers

Decide from your figures, not the lender's example.

Write down your normal monthly income after deductions
List your existing debt payments and the balance on each
Work out what share of income the new payment would take Include the debts you are already paying.
Test the payment in a month where an unexpected expense lands
Check your credit record for errors before you apply Fixing mistakes first can change the offers you are given.

Before you sign

The last pass, done calmly with the paperwork in front of you.

Confirm the amount borrowed matches the amount you receive
Check that the repayment date falls after you get paid
Ask about fees for changing the payment date or amount later
Find out whether anyone has to guarantee the loan for you optional
Keep a copy of the agreement and the repayment schedule
Note the first payment date in your calendar and set the payment up in advance

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