Over the last year, we’ve seen the cost-of-living increase, making it harder for us to stretch our monthly income to meet our needs. The need for financial support, whether that’s from loan lenders, or government packages, has increased rapidly. Whilst there are options to help you when you’re struggling, there are a few factors that you should think about before applying for finance to help you. Below, we’ll look at 5 of these factors in more detail, so you can avoid falling further into financial difficulty.
Do you really need it?
Opting for financial support is sometimes necessary, but it’s not always right for everyone. Before you consider any type of financial support that you’re going to have to pay back, you should think about whether you really need it. For example, payday and short-term loans should be used to help you in an emergency, when you can’t stretch your money to cover necessities that you need to live, as well as an unprecedented expense – they should not be applied for and taken without a lot of thought first. Make sure you’re getting financial help for the right reasons, for example, if there’s no other way of obtaining funding from savings. This will ensure that you don’t fall into further financial difficulty when you could have avoided it.
How much will it cost?
If you think that you need financial support, and there’s no other way forward, you must make sure that you know how much it’s going to cost you. You might think this is straightforward, but when applying for finance with an alternative or traditional lender, there are likely to be hidden fees. Makes sure you’re clear on how much you’re going to be spending in total, with the addition of interest, late repayment fees, and application fees. This can help you get a better idea of whether you’re getting a good deal with your chosen lender.
Can I get help elsewhere?
Think about whether financial support in the form of a loan is the best way to proceed – or could you get help elsewhere? For example, if you’re struggling to make ends meet each month, you could check whether you’re eligible for government benefits which can give you access to additional funds to help with your position. If you’re struggling to pay energy bills, you could call your provider, as they may be able to offer you support to help you manage. Reach out to others before taking on financial support that could have an impact on your financial stability.
Can I afford it?
Struggling with money can be a worrying time but try not to let it cloud your judgement when it comes to taking out a loan before you’ve worked out if you can truly afford it. Financial help in the form of a loan means money in your account, but you must remember, you need to pay it back. Short-term and payday loans can look tempting, especially because they are processed quickly, but when you apply, you should make sure that you know what it truly is going to cost you – as we mentioned above – and ensure it fits with your budget, so you don’t end up defaulting.
Could I make changes?
Before opting for financial support in the form of a loan, you should think about whether there are changes you could make that could have an impact on your financial situation. For example, if you don’t have a budget for the month, working out how much you have left to spend after bills can be a huge help when it comes to money management. It also allows you to identify whether you are overspending in unnecessary areas when you could be saving. Creating a budget helps you identify if there are changes that could be made to your spending so your bank balance can benefit. This could reduce your need for additional financial support.