Want to borrow some money? Don’t have a house you own to use for collateral? Here are some do’s and dont’s to guide you.

Start with the big guns
If you need to borrow some money as an unsecured loan, your first port of call should be your own bank, where your wages go into. The reason why you should go to a major bank is because of the structure of the unsecured loan.

Payments on the loans are made up of principal and interest. So as you make payments and reduce your balance, the interest cost also reduces. Also, note that you can make lump sum payments on your loan and can increase your payments to any extra amount - all without any costs.

Another reason to go to your bank is that they have your history of your wages going in. You can go to another major bank to get your loan, but be prepared and take the last three months of your bank statements with you. They may ask for more history, but this is a good starting point with them.

Follow the paper trail
Other paperwork to take along includes some payslips. If you don’t receive payslips from work, ask your employer for a letter showing that you work full time, or part-time and the annual salary and how long you have worked there. Be prepared to offer up two reference names.

These two people will not be used as guarantors but only as a point of call if the bank needed to get in touch with you and could not through the normal channels. Check with the people first of course, as the bank will confirm with the contacts you’ve provided.

Depending on the reason for the unsecured loan, take any paperwork such as quotes or an agreement to purchase.

The only stupid question is the one not asked!
Don’t be afraid to ask the lender any questions. They are there because of you and are qualified to offer good basic financial advice. If it wasn’t for the customer, the lender would be out of a job. So don’t be intimidated by them. They are there to help you, not to hinder you.

Ask about the different types of unsecured loans they have to offer. Ask about how the loan works. If you don’t understand something they tell you, ask them to repeat it. Remember, lending is their expertise, not yours.

If you still are not happy with how the lender is with you, feel free to leave. There are plenty of places that will be alot friendlier.

Finance companies
Thinking of going to a finance company for your unsecured loan? What you need to understand is the difference between a finance company and a bank. Some finance companies will offer you a lower interest rate for your loan.

Sound good? Check out the payment structure first. You may find that the interest over the whole term for the whole amount is paid for first before you even start reducing your original balance you took out. OUCH!!!

Also, ask about all costs that may be incurred on the loan. Is repaying early allowed? Can you make your payments higher without costing you more?

These are questions few people think to ask the lender and find out later when it is too late.