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How to apply for an Irish bank loan

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By Eli Romary / February 13, 2020
Irish bank loan

As the cost of living rises, so does the cost of basic necessities. Things like housing, cars, and travel are becoming more expensive than in the past. In order to combat the rising costs, there is no shame in taking out a loan in order to ease financial burden. Here is everything you need to know in order to get an Irish bank loan.

What do I need to get a loan in Ireland?

Before you apply for an Irish bank loan, it is important that you sort out your budget. This will determine how much you can afford to pay back each week and will ultimately determine how much money you can receive in your loan. Working within your budget will also allow some wiggle rooms when it comes to unexpected costs that may come up. It is important to consider how much money you actually need to borrow and whether or not you can afford the repayments, especially if something unexpected comes up (like losing your job or a reduction in your working hours).

You will need certain documentation when applying for your loan. You will need a PPS number, proof of ID – passport, driving licence – and proof of your Irish address, such as a utility bill. You will need proof of income. This can be in various forms, such as your latest P60, payslips, or certified accounts if you are self-employed. Most importantly, you need proof of how you manage your money. This can be done through current account or loan statements from the past three to twelve months.

What type of loan should I get?

There are two main types of loans that you can get: A fixed rate or a variable rate loan. There are pros and cons to each, and the right loan for you is dependent on your needs.

A fixed rate loan is basically a loan where the interest rate does not fluctuate during a fixed amount of time. The pro to this loan is that the amount you have to repay is guaranteed to stay the same throughout the entire period of the loan. This means there won’t be any surprises. However, this also means that if interest rates fall, your repayment amount will not. This also means that lenders may not let you pay extra during each repayment period, and you may even have to pay a fee in order to pay back the loan early.

A variable rate loan is an Irish bank loan where interest rates change over time. This gives you the flexibility to pay off your loan early without any extra fees. Different amounts can be paid during each repayment period, and you can even pay off your loan in one lump sum if needed. If interest rates decrease, then so will your repayments. Or you can choose to keep your repayment amount the same so that you can pay off your loan early. However, interest rates may rise during your loan term. This means that if you choose to keep your repayment amount the same, it will take longer to pay off your loan.

For how long should I borrow?

You need to decide on how long you can borrow for. The longer your loan lasts, the more interest builds up. This means that you will end up paying more in the long run. For example, if you are borrowing in order to make a car payment, you should aim to have the loan paid back within 3-5 years. If you are borrowing for a holiday, you should try and have the loan paid back before your next holiday.

What do you mean by interest?

Interest rates impact the amount that you have to pay back in your loan, especially if you go for a variable rate loan. When comparing loans, you should look at the APR and/or the cost of credit.

APR is the annual percentage rate. You can use APR to compare loans as long as they’re for the same amount and the same amount of time. The lower the APR, the lower the cost of credit and the lower your repayments. Let’s say you borrow €10,000 and pay it back over five years. If you have a loan at 9% APR, you will have a monthly repayment of €206. The total amount you will have to pay is €12,353 with the total cost of credit being €2,353. Compare this to a loan at 14% APR. You will have a monthly repayment of €228 and the total cost of credit at €3,706. So, the total amount paid is €13,706.

The cost of credit is essentially the real cost of borrowing. This is the difference between the amount you borrow and the amount you will actually owe by the end of the loan period. In order to calculate your cost of credit you first need to multiply your regular weekly or monthly repayment amount by the number of repayments you will make. Then, add on any other charges that you have to pay. These can be administration or set up charges. This will give you the total you will have to pay on your loan. Then, subtract the amount you will borrow from this total. Now you have the cost of credit. Remember, the longer your loan term, the higher your cost of credit will be.

How do lenders make their decision?

Unfortunately, you can’t just decide to get a loan and automatically receive one. Your ability to get a loan and the amount you are able to get depends on the lenders. Lenders look at a wide range of factors before they decide whether or not to give a loan. These factors include income, age, employment status, money management, savings, current outstanding loans, credit history, the amount you wish to borrow, and the number of applicants. It is best to make sure that your money is in order. So, take care of any outstanding loans, work on your credit score, and make sure you have a proven track record of good money management.

What happens if I’m rejected?

Not everything will work in our favour, and sometimes our requests for an Irish bank loan will be denied. If you are refused a loan, it may be because the lender may not believe that you can afford your repayments or pay them back on time. If you are refused a loan, you are allowed to ask the lender why, and they will usually provide you with feedback. You may want to check your credit history if you are denied in case of an error in your records. Finally, it is the lender who decides whether you are granted a loan or not, so if you are unsuccessful with one, try another, as each use different methods to determine an applicant’s eligibility.

About the author

Eli Romary


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