Personal Loans – How To Make Sure You Get The Best Deal
If you are in need of obtaining additional money quickly, then
your main choices are using a credit card or obtaining a
personal loan from a bank, building society or from a specialist
loan company For short term borrowing credit cards can be
useful, but for longer term borrowing a loan may seem to be the
best option Whenever you take out a loan or credit agreement,
your prospective lender will assess your personal circumstances
and decide whether to offer to lend you the funds you require
subject to its repayment with added interest being paid
Depending on the result of a financial health check (completed
by the lender), you may be offered, on average, up to £15,000 to
be paid back over a period of between 6 months to 10 years The
actual amount that you can borrow and the interest rate charged
will depend on factors such as your past credit record, amount
requested, duration of loan, purpose of the loan, whether the
amount borrowed is secured or unsecured, and acceptance of
various terms and conditions applied by the lender
What is the difference between a secured and an unsecured loan?
An unsecured loan is where the loan repayments are not tied to
any additional guarantee except the loan agreement Should you
default on payments you could damage your credit rating or
become blacklisted which may lead to future difficulties in
taking out a new credit card, a mortgage, additional loans, or
obtaining interest-free deals in shops A secured loan is one
where you provide collateral which will guarantee the repayment
of the loan should you find yourself in unexpected difficulties
This type of loan is usually secured against your house, which
means that if you cannot meet the loan repayment schedule, you
may be required to sell your house in order to pay back the
money borrowed Secured loans are generally seen as less of a
risk by lenders, as they are likely more to recover their money
if things go wrong This means that the amount that can be
borrowed is usually higher, and the rates offered are often much
better than would be obtained on an unsecured loan
An important point to note is that rates can vary considerably
On a £5000 unsecured loan repaid over two years without any
adverse credit history, financial comparison site Moneynet (
netcouk/loans/indexshtml ) provided results varying from
an annual percentage rate (APR) of 55% to 159% which would
make a difference of £52536 over the life of the loan Don’t
just take the first loan you see
Another factor to bear in mind when looking for any financial
product is to ensure you are comparing like-with-like Different
lenders calculate the annual percentage rate (APR) in different
ways Don’t simply look at the monthly interest rates – these
are frequently lower than the annual rate and can make you think
you have got a much better deal than you have in reality
Remember to check all the details and small print of a loan
before taking out any type of financial agreement to ensure you
understand what is required of you and that the loan meets your
requirements Bear in mind that in general, the shorter the
repayment period of a loan, the less interest that you will be
required to pay However according to IntelligentFinance (
loanhomeasp ), over a third of the UK adult population are
unaware that 75% of personal loan providers levy penalties on
borrowers who want to repay their debt early This could prove
to be an expensive surprise and IF estimates that it is
currently costing consumers about £336m a year
Should you get rejected for a loan at a bank or building
society, it is useful to know that they are obliged to explain
the reasons for doing so Any time that you are rejected you
should also run a check on your credit history to make sure no
mistakes have been made, and you can request that a notification
of correction is made to prevent the same thing occurring in the
future
The most important things to do when looking for a loan are to:
* decide on your loan requirements * compare as many of the
products being offered as possible * read the small print *
choose whether you are happy with the terms being offered *
ensure you can meet the repayments * only make one application
at a time
Useful resources:
BBC credit scoring links (
ttp://newsbbccouk/1/hi/programmes/moneybox/4315456stm )
Moneynet loan comparisons (
netcouk/loans/indexshtml )
Disclaimer:
All information contained in this article, is for general
information purposes only and should not be construed as advice
under the Financial Services Act 1986
You are strongly advised to take appropriate professional and
legal advice before entering into any binding contracts
Tags | agreement, blacklisted, collateral, credit, health, loan, personal, prospective, repayments
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