Borrowing money, whether for a big life event, a new business venture or the trip of a lifetime, should be carefully considered. Making the right financial decisions is imperative, and that starts with choosing your lender. Working with a responsible lender who has your best interests at heart is crucial.

However, if you’re not sure where to start with finding the right lender, here are four key questions you may want to ask and the answers you’d hope to hear.

How much can I borrow?

Each lender has its own set of criteria for determining maximum loan amounts. This will include credit history, credit profile but most importantly, their assessment of your ability to repay. This is usually undertaken by way of an analysis of your income and expenditure, ensuring that you can afford the monthly repayments for the duration of the loan. Typically, they will want to ensure that your expenditure is covered by your income with a margin to cover any unforeseen costs. Good lenders will not want to put their customers under undue financial pressure by offering loans that are unaffordable.

Additionally, they’ll be your first port of call for support and guidance if you run into repayment difficulties. They’ll be able to signpost you to external resources, as well as work with you to resolve your situation to the best of their ability.

Will I have the same point of contact throughout?

Many lenders have Client Relationship Managers assigned as the primary source of contact for customers at the outset of the loan. Client Relationship Managers can leverage their expertise to help customers make the right financial decisions.

While it may not be the same manager every time you speak with your lender, everyone who manages your loan will have in-depth knowledge and understanding of your circumstances.

What is the maximum repayment term?

A personal or business loan repayment term usually ranges from two to five years but exactly how much time you take to fully repay is often for you to decide at the outset. The loan term you choose affects your monthly repayment amount and how much you pay in interest over the life of the loan – i.e., the longer the repayment term, the greater the amount of interest you’ll pay.

In deciding the repayment term, a responsible lender should work with you to consider the monthly repayments alongside your other financial commitments. This ensures that in repaying a loan as quickly as possible, you don’t put yourself under undue financial pressure.

Will everything be clearly explained to me?

All lending documentation should be clear, fair, and not misleading. In Jersey, the Code of Practice for Consumer Lending is a voluntary code of practice with the key aims of:

  • Enabling Jersey consumers to be fully aware of, and understand, the terms under which they are borrowing money;
  • Enabling Jersey lenders, brokers, and financial advisers to obtain the right information to ensure that credit is not advanced where the ability to meet repayment might be in doubt;
  • Promoting responsible lending.

Close Finance subscribes to the Code, a copy of which can be found on the Government of Jersey website.

Knowing which lender to go to when taking out a financial loan isn’t always a straightforward process, but by asking the right initial questions you can find the best lender for you. Any responsible lender will take the time to assure you, work out your affordability, explain the risks of lending, and supply the required documentation and paperwork.