Cheapest Loans

How to save money with a personal loan

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You need to consider several points when you’re thinking of taking out a personal loan,  is it going to be a secured loan on your property as in a homeowner loan, if you do not pay they can make you sell your house not a good idea if you can avoid it. Is it to consolidate other loans so that you only have the one payment leaving your bank rather than many. How much do you want to  borrow, over what time period is best for you, where to go to, what the loan rate is, and what your chances are of getting the loan as the more times you apply the worse your credit rating will be.

Loans offers vary depending on your circumstances. You will always be able to borrow more on a secured loan rather than an unsecured loan as they have something physical that they can sell to recoup their money. In the simplest cases you can get approval in principle online and actually get the money within a few days once the forms have been filled in.

Loan periods also vary, but remember the longer you take the loan out over the longer you are paying them interest. Car loans are generally over 3 years but if you take out a debt consolidation loan this will probably be over a longer term so that you can actually have a chance of living as well as repaying the debt consolidation loan  some lenders  go as high as ten years or more for this type.

If you are taking out a refinancing loan try not to add any extra to the loan .Just remember you are having to take out a refinancing loan for one reason only to help pay off your other debts

There are a lot of loan companies who would love to lend you money. These include the obvious banks and building societies, and the less obvious supermarkets, but the latter can offer very competitive rates. Again, the sensible option is probably to avoid small firms that you have never heard of and stick with a well established business. This is not a highly competitive market and some loans can carry very high interest rates because the buyer has not shopped around. You must also watch out for redemption penalties, which can add hundreds if not more if you wish to pay off your loan early, for example, by switching to a cheaper loan with a different loan company. As a rule of thumb, mainstream lenders usually charge a penalty of no more than two months’ interest should you wish to pay off your loan early.

Interest rates are usually fixed for the term of the loan, so you will know exactly what your repayments will be each month. On one hand this is good, but on the other, it may be that somewhere down the line new loans are on offer at much lower interest rates. Of course, if base rates continue to rise, you could be using a loan at much cheaper interest rates than are available later on. Whatever the future situation turns out to be, you do not have the concerns as with a mortgage of fluctuating (rising!) interest rates and higher repayments. Most lenders will want you to take out a direct debit to make the repayments. There is another general rule, and that is: the larger the loan you take out, the lower the interest rate. The key figure to look for is the annual percentage rate (APR), as this will include the effect of any arrangement fees that you might have to pay up front. In actuality, there are not many such fees around these days.

When you apply for a loan the lender will inevitably run a credit check against you. They’ll want to know that you are a good risk without a history of bad debt and unpaid loans on your credit history. They will check your credit one of the two main credit references agencies in the UK –Experian or Equifax. Although a poor credit record may not ultimately prevent you from getting a loan, you will probably have to pay a higher interest rate to get it. If you are self-employed or work on short term contracts, you may find it harder to get a loan.

An unsecured loan is not tied to a big asset of yours, such as your home. For a secured loan, if you fail to make repayments the lender can repossess your home. With an unsecured loan this cannot happen, and that means that interest rates tend to be higher.

Many loans come with the offer of loan protection insurance, which covers your loan in circumstances where you cannot make payments, such as illness or unemployment. Such cover can often be  expensive, so give it some thought before you take it out. Some lenders may make the insurance compulsory, but look out for exclusions and what’s held in the small print that might make a claim difficult to actually make.

The insurance did not used to be shown in the APR, but new rules mean that the APR must include the insurance cost, meaning true comparisons are much easier to make