4 Common mistakes to avoid when it comes to personal loans
Personal loans are a great way to cover an unexpected expense or a great step in improving your credit rating if you pay them on time. With any loan, there is always things to keep in mind to make sure you don’t fall behind or negatively impact your financial situation.
We’ve listed 4 common mistakes you can avoid when taking out a short term loan:
- Being late in your repayments: Each time you apply for a loan, credit card or mortgage your credit file, which details your financial history, is used by lenders to assist in approving or rejecting your application. Included in your credit file is your repayment history. By not making repayments on time on your short loan you could affect your future borrowing ability as these late repayments will be listed and visible to lenders for up to five years. Swoosh aim to make it easier for you to avoid late repayments by setting up automatic direct debit as well as handy SMS reminders if required.
- Applying for several loans at the same time: As well as your repayment history, your credit file also shows lenders all applications you have made. That’s right- any loans you applied for, even if you were rejected, all show up and can negatively affect your credit score. Making lots of applications all over the place might lead lenders to believe your financial position is rocky and they might feel it is too risky to approve your loan, particularly if you get several rejections from various companies. At Swoosh we understand that things change and your circumstances could turn around after applying for a loan with us. That is, if your application is declined by us, you may be eligible to reapply in the future if your circumstances changes or you are able to provide additional documentation to support your application. This may show up better on your credit history rather than if you were to then apply with several different companies.
- Having too many loans: Taking out too many loans at the same time can be seen as a bad thing on your credit history so it might be worthwhile to get a single loan under one account for the amount you require. For example, it could show up more favourably on your credit file if you have one x $2,100 loan as opposed to four x $500 loans.
- Not checking your credit file. To be sure your credit file displays your correct financial history it can be a good idea to regularly check for any possible mistakes and be sure it is representing you positively. Check that any past loans or accounts are detailed properly and you can also see how your current position looks to lenders when you are applying for a short loan. Make sure there are no mistakes on your credit report. In addition, be aware that any past defaults stay on your credit report for five years. Sometimes people struggle to apply for a loan or even a mobile phone plan because they are not aware that a default is showing up in their credit report and there is a chance it might be there in error. You can have an error removed if it was incorrectly listed by a previous lender or company.