Tips for taking out a Personal Loan
When you are taking out a personal loan there are a few things that you need to know.
When it comes to taking out a personal loan you need to shop around so that you can compare APRs. The APR will tell you the real cost of a loan and takes into account the interest that needs to be paid, other charges and when the payments are due.
Your bank will tell you that they will offer better rates to current account holders but you may find cheaper loans somewhere else.
The Small Print
Before you apply for a loan, you will need to look at the small print and see if you are eligible. You may find that some loans will have outrageous conditions that you need to adhere to.
Early Repayment Charges
When you take a loan you need to think that it might be possible to pay off the debt early. There are many loan providers that will charge if you want to do this, so you should see how much this would cost before you apply. You may also find loans that will not charge if you choose to pay the debt off earlier.
Shop around for PPI
PPI is payment protection insurance and can be useful to some. It has been designed to cover your monthly loan or credit card repayments if you are not able to meet them due to unemployment or sickness. If you feel that you want this protection then you will need to shop around for the best deal.
Check your Credit Rating
You will need to check your credit rating first if you plan on applying for a market leading personal loan. If your credit rating is not that good then you might be offered a more expensive deal.
What About Credit Cards?
You should consider other forms of credit before you apply for a loan. A credit card might be cheaper and a card that has a 0% introductory offer on purchases will allow you to spread the cost of a big purchase interest free.
You can also use peer-to-peer lending, which allows borrowers to be linked to lenders. You will need a decent credit score in order to be accepted.
Generally the larger the loan then the lower the interest rate. The way that some providers price their loans, it means that there are occasions where you are able to save money by borrowing more.
Don’t take Out to Many Loans
When you take a loan out online you will leave a reminder of this on your credit report that lenders check before approving a loan. If you have lots of applications on your record it makes you look like you have financial difficulties. You are then seen as a credit risk so your next loan application will probably not be approved.
The Risks of Secured Loans
A secured loan is cheaper than the unsecured loan, but a secured loan does mean that if you miss payment your home will become at risk. Secured loans will only be offered to borrowers that have a home with equity in the property. You shouldn’t sign up to a secured loan unless you are completely sure that you are able to make the repayments.