Used properly and responsibly, credit can be useful for a wide range of purposes, from spreading the cost of large purchases to plugging a gap in an emergency. However, there are a lot of different credit products around from a number of different providers, and borrowing costs can vary very widely. There are a number of steps you can take to ensure you get the most affordable deal possible when borrowing.
Get Your Credit Rating in Shape
The better your credit rating, the more likely you are to qualify for the best deals. If in doubt, there are a number of things you may be able to do to improve your score, potentially even at fairly short notice. Looking at your current report and then taking steps to improve it can be a useful first step in finding the best deals on credit.
Know Your Options
Some credit products overlap in terms of the amount you can borrow, but offer very different rates. Credit cards offer 0% offers which can be extremely useful, but are otherwise expensive forms of borrowing compared to many alternatives. Payday loans – which are usually best avoided – can be used for a similar amount of borrowing but carry interest rates so high that even the worst credit cards look negligible. Look into different forms of credit and choose the one that fits your needs at the best rate.
Shop Around
As with so many things, it is best to shop around in order to find the best deal. Many lenders offer finance products of the same kind and which are almost identical except for having wildly different rates of interest. When looking at personal loans, check not only the offerings of different providers but also different amounts of borrowing. Lenders offer better rates the more you borrow, so if you are near a threshold it may be that you can increase your borrowing slightly in order to unlock a better rate and ultimately be better off.
Pay Back ASAP
Assuming there are no early repayment penalties, paying back early is one of the best ways to reduce the total cost of borrowing. The sooner you pay back, the less time interest will have to build up and the less you will ultimately pay for the loan. If your intention is to spread the cost of something, then there may be a balance to strike, but on the whole it is definitely a good idea to repay early if possible. Make repayments above the minimum if you can, and try to repay it as soon as you can without putting yourself under financial pressure.