Type of Borrower

What type of borrower are you?

Type 1: The disciplined borrower – has a steady income stream, and is taking out a loan to finance a larger purchase.

You have a good handle on your finances, and are making a larger purchase (such as buying your first car) that you simply cannot buy outright. You have a good credit history, so can probably qualify for some of the lowest APR rates available. You would probably prefer a fixed rate loan to help you budget over the term of the loan.

Type 2: The in-debt borrower – likely is already carrying some credit card or other debt, and is taking out a loan to improve interest payments.

You already have some experience with debt, and are now consolidating your outstanding debts with one loan to reduce monthly interest payments. Your credit history may have some black marks on it, so it might be difficult to qualify for the lowest APR available. Also, chances are your monthly budget is quite tight, so extras like repayment breaks and Payment Protection Insurance are important to you.

Type 3: The big spender – looking to take out a loan for a big occasion, such as a holiday for the family.

You’re looking to get a loan to stretch beyond your means and to treat yourself to something special. You should consider carefully if it’s worth the expense, as depending upon the amount and term it may take years to pay off the loan. You could be sacrificing future special treats for a big splash out now. If you decide that a loan is the right way to go, shop around carefully and look for a loan that affords the maximum flexibility, and in particular doesn’t penalise for early repayment.