While it has been suggested that consumer borrowing may have declined slightly in recent times, this is not necessarily the case. Sure, borrowing from high street banks may have grown at its slowest pace since 2015 during May, this does not mean that customers are not seeking credit from alternative sources.

In fact, online lenders are becoming increasingly popular in the consumer market, thanks largely to their accessibility and relatively quick approval times. With a growing number of people borrowing online, it’s little wonder that banks are reporting a slight downturn in loan applications.

Regardless of the type of loan that you want to take out, it’s important to determine precisely how much to borrow. This can be challenging, so read on below to see our guide to borrowing responsibly from lenders.

1. Appraise your Circumstances

When dealing with personal unsecured loans, the chances are you’ll need these funds for a specific reason. After all, borrowing cash to fund an existing lifestyle is to be avoided at all costs, as this simply creates a constantly growing and unmanageable debt over a concerted period of time.

The reason for your borrowing is crucial, and fully appraising your circumstances will help you to understand exactly how much you need.

This process starts by evaluating the issue at hand, and asking whether or not there are any alternatives to lending? If not, you should strive to calculate the precise cost that you’re trying to cover and the subsequent borrowing amount, working in pence rather than pounds to ensure that you only apply for exactly what you need.

This type of critical thinking can help you to save money while making it easier to repay your debt in the future.

2. Understand the Role of Interest

After step one has been completed, you’ll need to compare the role of online lenders and shortlist your preferred service providers.

Before applying online, however, you need to ensure that you fully understand the influence that interest rates have on your total repayment and your ability to settle a debt within the requisite time-frame.

Fortunately, most reputable online lenders will offer you in-depth information on their products, helping you to understand your responsibilities and nature of unsecured lending before your commit.

Similarly, you may also want to access tools such as online loan calculators. With these tools, you can see the costs associated with different borrowing amounts and calculate the total amount repayable for each one, helping you to work in precise figures and enter the market fully prepared.

3. Don’t Forget About your Unique Financial Circumstances

At this point, you may be ready to push the button, complete your online loan application and sit back while waiting for your funds to land!

We’d urge a little further caution at this time, as your own, unique financial circumstances will play a role in influencing your decision. Take the nature of your employment, for example, as individuals on fixed-term contracts may want to adopt a more conservative approach when applying for credit.

Similarly, those who are paid weekly will also need to manage their money in a way that enables them to make monthly repayments. Otherwise, you may need to lower your borrowing amount and seek out a more manageable arrangement.

Once again, the key here is to think critically and measure your financial circumstances alongside other needs and the loan terms on offer. This is crucial to effective decision making, while it will enable you to seek out a product that is truly fit for purpose and ultimately capable of helping you to avoid longer-term debt.

Vicky Charles

Vicky is a single mother, writer and card reader.


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