How to Prepare for a High-interest Personal Loan?

Personal loans are the most popular type of debt in the world. However, most lenders require borrowers to have good credit ratings, especially if they need large amounts of money. However, sometimes individuals go through financial issues that cause their credit score to drop only to find that they then need a large loan to pay for various urgent expenses.

When this happens, it can be expected that the lenders will offer disadvantageous terms and conditions, along with high-interest rates. Although the situation may seem grim, there are steps that borrowers can take to get ready to repay the personal loan.

Give Your Credit Score a Boost

Whether you have a bad relationship with a particular lender or have gone through a period of financial instability and there still are a few things that you can do to increase your credit rating:

  • Consolidate Your Debt

Although it may seem counterintuitive, however, taking out a debt consolidation loan before requesting a personal one can help lower the interest rate that will be attached to it. Lenders look at how many loans you are paying and at their total cost. If you are currently repaying two loans that have different monthly repayment terms and interest rates, consolidating them in a single one can reduce the total cost of your debt. This will also make the lenders see that you will be able to repay the new one without issues.

In some cases, this step may be necessary for your loan request to be accepted, in addition to getting better terms and conditions.

  • Pay off Your Credit Cards

Most people are not aware of how much of an impact their credit usage ratio has on their credit score. Generally speaking, if you have a credit card with a £5,000 limit on it, of which you’ve used £2,500, most lenders will conclude that you are unable to manage your monthly income. Thus you will be unable to repay the loan on time.

Ideally, you should use under 30% of the credit that you have access to, which in our example would be £1,500. This is usually considered acceptable by most lenders and will not have an impact on your credit score.

  • Use Alternate Types of Lenders

If you need money right before requesting a loan, consider using online lenders. Most online lending platforms do not perform credit score checks and do not report the transactions to credit registers, which means that the loans will not appear on your financial records.

Create a Financial Buffer

You mustn’t spend all the money from the loan. Keep a small part of it in a savings account that you can use as a financial buffer in case you ever have trouble making the monthly repayments.

Try to put approximately 2-3 months’ worth of repayments aside. If your income suddenly drops, you will have time to find a better job or a way to supplement it and get back on track.


If you are planning to get a high-interest rate loan, try to have at least one financial backup that you can use. Putting a part of the loan aside is one method that you can use, but some prefer to find a relative who is willing to cosign the agreement. Regardless of what methods you choose, keep in mind that if you have a poor credit rating, lenders may not have patience if you are ever unable to make the monthly repayments. This means that you will have to have plan A, B, C, and D prepared.

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