5 tips for getting the best deal on personal loansTweet
Whether you are planning some home improvements, looking for a holiday bargain or buying a new car, finding the best possible deal on a personal loan has the potential to save you hundreds of pounds over the course of several years. Taking on modest, affordable levels of debt is often the price you have to pay for securing the more expensive purchases in life, but by following five relatively simple tips, you can make sure that your debt doesn’t unduly affect your overall standard of living.
1. Check Your Credit Rating
Your credit history plays a major role in your ability to secure credit – and the price you have to pay for it. If you are regarded as being a high risk borrower, you may be charged a higher rate of interest, or you may be refused for a personal loan altogether. However, by checking your credit file in advance, you can make the necessary improvements before you apply. There may be old information and various inaccuracies on your file which might make borrowing a far more expensive endeavour than it needs to be.
2. Look Past the Headline Rate of Interest
Most providers that offer personal loans will advertise a representative APR – which will normally be what at least 51 percent of customers pay for securing a loan. However, this APR may not apply to the amount you wish to borrow, so it’s always a good idea to ascertain the exact cost of borrowing the amount you need. This can be done by reading the small print in detail, or by using a loan calculator provided by the lender. Depending on your specific circumstances, and the amount you’re trying to borrow, the interest rate you end up paying could be very different from the rate being advertised.
3. Shop Around
There are literally hundreds of personal loans on the market, so a degree of market research will be necessary if you want to secure the best deal out there. You should search beyond the major high street banking brands, as there are some excellent deals around with smaller, emerging financial institutions. However, it is important that you obtain quotes based on the amount you need, and you should check the eligibility criteria before deciding on the best deal. Some loans will not be available to you unless you have a near perfect credit rating, and several applications in a short space of time could damage your credit rating.
4. Consider Whether Payment Protection Insurance is Essential
Payment Protection Insurance (PPI) will ensure that your payments are maintained in the event that you lose your job or become ill and can’t make them yourself. However, these protections may already be in place through benefits associated with your employment. It may also be possible to secure protection via an independent insurance policy at a much lower rate. Most lenders will attempt to sell you PPI at some point during the application process, but strict rules on the selling of PPI products mean you cannot be pressurised in any way to buy one.
5. Consider Peer-to-Peer Lending
Peer to peer lending involves ordinary people lending directly to borrowers – without the involvement of traditional financial institutions. A peer to peer platform such as Lending Works puts borrowers and lenders in direct contact. This gives savers a higher return on their savings than that offered by mainstream savings accounts, and it gives borrowers access to affordable loans without much of the red tape involved in borrowing from banks. And unlike traditional credit facilities, they allow you to repay your loan as quickly as you like without the need to pay early repayment penalties. With a range of in-built protections in place for both borrowers and lenders, this method of securing a personal loan is becoming increasingly popular throughout the UK.