Everyone faces surprise expenses or sudden cash needs. Even when there’s a monthly budget, we can all come up a bit short from time to time. Sometimes it’s clear when something unexpected has happened and other times it can occur without you really being aware of it. Whatever has happened, if you think you need to borrow money, you should consider several questions before taking out a loan.

DO I REALLY NEED THIS MONEY?

You are considering the loan because you need the money, but is it possible to find another source of funds or hold off on some other expenses for a few weeks instead of borrowing? This is the most critical question, so sleep on it before you decide. If you wake up the next day and still really need the cash, then before moving forward you should answer these questions.

HOW MUCH CAN I AFFORD TO PAY BACK EACH MONTH?

This question is truly the first step. If you do not carefully consider how you will repay this loan, then, in the best case, you may find that you have sacrificed your savings for the next few months to solve today’s crisis. In the worst case, you may find that you have put yourself into a larger crisis next month.

Sometimes there is a difference between how much you think you need and how much you really need. To understand this difference you need to recognize how much of your monthly income you could allocate to loan repayments. You can use our simple interactive budget planner to help you calculate this amount. Before you borrow, you need to know that you can afford to repay your loan with interest. Remember, lenders offer a range of interest rates and terms so make sure you know how much you can pay back each month.

HOW MUCH MONEY CAN I AFFORD TO BORROW?

Based on your new understanding of how much you can afford to repay each month, you are now ready to explore how much money you can afford to borrow. The amount you can borrow will be decided by how much you can repay each month, the length of time the loan will be stretched over (the term); or the number of payments you want to make to repay the loan and the interest rate that the lender charges. Every lender is legally required to tell you how much your monthly loan payments will be.

Whether your credit score is high or low, you can always apply for a loan. However, your individual credit score will affect which lenders will consider you for a loan, whether the lender will approve your application and what interest rate you will be charged. In our loan advice section, our financial experts explain the different types of loans available. Because how much you can afford to borrow is directly related to the interest rate a lender charges, it is very important to shop around.

WHY SHOULD I BE CAREFUL WHICH LOAN PRODUCT I CHOOSE?

Interest rates vary widely across lenders and types of loans. A short-term loan is usually a high cost credit product, generally with interest rates exceeding 1000%. An instalment loan allows you to make a number of repayments on your loan over a longer period of time such as a couple of years. This can reduce the amount you need to pay each month, but it’s still very important to pay attention to the interest rate and the total cost of the loan. A one-year bank loan with a 3.3% interest rate, a three-month loan with a 500% interest rate, a six-month loan with 237% interest rate, and a 24-month loan from 118118 Money at representative 99.9% APR are all different types of instalment loans.

Because not all lenders offer the same loans, one way to compare loans with different terms and interest rates is to use the APR or the Annual Percentage Rate. The APR calculates the total cost of the loan including all fees, charges, interest over the term offered and then gives you a percentage rate over a one year period. This provides a simple straightforward way to accurately compare two loans quickly.

WHY ARE THE APRS ALL SO HIGH THAT THEY SEEM UNREAL?

While these APRs may seem unreal, they are very real and they have a very large impact on how much a loan will cost, potentially pushing up the total amount you have to repay to many times the original sum you borrowed. Here at 118 118 Money we offer an APR of 99.9% (representative) depending on amount, term and the results of a credit check. We want to help you with your financial situation and have kept our APR rates competitive, as well as manageable.

IS IT IMPORTANT TO PAY OFF MY LOAN AS QUICKLY AS POSSIBLE?

The longer you have debt, the more it costs and these costs can add up. Borrowing more money to clear these debts is one way to solve the problem, but it’s very important to understand how much you can repay each month and how much you need to borrow. Once you understand the term of the loan, you can decide if that is the right loan for you and if the total cost of the loan is acceptable to you. Don’t agree to repay a loan faster than you can afford.

CAN I APPLY FOR MORE THAN ONE LOAN AT THE SAME TIME?

Each time you apply for a loan it can affect your credit score as it shows lending companies you are searching for credit. But by applying for loans with different interest rates or APRs, you might be able to get a better deal and lower the overall cost of borrowing. You must think about your personal situation and decide if your credit history is such that you can afford to make two applications to try to save money.

WHY SHOP AROUND FOR A LENDER?

The lender you choose is important. When you borrow money, you are entering into a relationship with your lender and it’s important that you trust this lender. If you do run into trouble and need to discuss your situation with a lender, it is always better to have a lender who is reachable and flexible when you need it like 118 118 Money, where you are able to contact us 24/7 to discuss any queries you may have.

You’ll also want to make sure any loan offer you receive is affordable. When you’re shopping around, there’s no need to rush and accept the first offer you get – ours is valid for 5 days so you don’t need to panic.

WHAT SHOULD I DO IF I NEED TO BORROW MORE MONEY THAN I CAN AFFORD?

You should never borrow more than you can afford. A loan is a contract that you sign and it represents a legal agreement. If you do not think you will be able to repay the loan on-time and in full, then you should not borrow the money. The consequences of not repaying or defaulting on a loan obligation are extremely serious and will have a long-term effect on your financial future. Some lenders charge late fees and penalties for not paying and some do not, but in any case, a default or late payment or series of late or missed payments can negatively affect your credit score. In addition, if you do miss enough payments, your lender can put your loan out for collection by a third party debt collection agency or take legal action against you to recover the funds.

BORROWING MONEY WITH 118 118 MONEY

You are not alone! At 118 118 Money, we make borrowing money a thoughtful and transparent process. We offer online loans that put you back in control of your finances. Choosing us means you know exactly what your loan will cost and you know upfront how much you will need to pay back. You choose how long you need to repay your loan with terms from one to two years. Explore how we are different from other lenders and compare our rates and terms to see how favorable a loan from us can be.

Remember, we put our faith in you. We want you to clearly understand what your options are and how your decisions can save you interest and help you to avoid damaging your credit score. We take the time to assess your affordability and to understand your financial situation. While we strive to give you a decision in one hour and if approved, can transfer the cash to your bank account within 24 hours, we want you to think about your decision and not rush to borrow money. Our loans have no upfront fees or hidden charges, guaranteed.

If you do ever have excess cash, you can repay more in any month than the agreed loan payment . On the other hand, if you do get into a sticky situation later on down the line, we won’t charge you any late payment penalties or fees. We encourage you to review our money guidance to begin building a solid financial foundation for the rest of your life. Try out our loan calculator and see how much you can save.

Representative example: Amount of credit £1,810.48 for 24 months. Interest rate: 71.3% pa (fixed). 24 scheduled monthly payments of £143.48. Total amount repayable: £3443.52. Representative 99.9% APR.

Rates from 35.9% APR - 99.9% APR fixed.