Many of us feel when we are taking out a loan, that we are not so sure on how they work or how much that you feel that you should apply for, unless you have a specific purchases that the money is going on.
Deciding on how much and over which length of time, which we want the loan should really depend on how much you can afford. The thing with this though, is that the lenders try to dictate to you, how much of a loan to take. This is because they stagger their interest charges, with the amount that you wish to borrow. With a higher percentage interest charge, for example on 1000 that could be as high as 20%, with a loan amount of 20,000 or more coming with an interest charge in single figures.
You may look at this and work out that you will get a lower interest rate if you take more of a loan. But by doing so this will mean that to afford the repayments on the larger loan amount taken, you will then have to pay it back over a longer period of time. This will give the lender a steady income over the term of the loan, which could be 5 years. Where as if you had taken out your original smaller loan, you could have had it paid off over a year or two.
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