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Personal Loan Deals Some Helpful Tips

by Jim ONeil on June 2, 2011

in personal loans

An unsecured personal loan can be used to pay for unexpected expenses or fund exciting purchases like a vacation or new large-screen television. Borrowing money obligates a consumer to repayment according to the loan terms and conditions.

By finding a great deal, consumers are able to make their loan work for them. It also makes the loan process easier and less stressful because consumers will be focused on what to do with the money, not how to get and repay it.

Credit history influences credit rating, which affects the ability to get cheap loans. How consumers handled credit in the past determines whether they will qualify for a loan and if so, what loans APR they will receive. Someone who is viewed by a lender as high risk usually has a history of County Court Judgments and defaulted payments.

This person will not usually receive the loans cheapest for borrowers because he or she is not as likely to repay the money. To ensure that they are eligible for the cheapest loans, consumers should check their credit rating through Callcredit, Equifax, and Experian and take steps to improve it before applying for a loan.

While it is recommended that consumers request loan quotes from several lenders, caution should be exercised. Getting many loan quotes within a short time can make a negative mark on the credit rating. It causes lenders to think the individual is desperate for credit and is a high-risk borrower.

Rather than making multiple quote requests or applying for many loans, consumers should use a loan repayment calculator to get loan quote details.

Whether they are interested in a secured or unsecured loan, individuals will notice an advertised representative APR. This is the interest rate offered to at least 51 percent of borrowers by the building society or bank. This rate is often only applied to loans within a certain borrowing range so consumers should research this. A loan calculator can be used to determine the total cost of the loan based on how much must be borrowed.

When conducting loan comparisons, consumers should assess rates and overall costs for the amount being borrowed. Looking past the representative APR to find the rate that applies to the loan amount desired will provide a more accurate picture.

Borrowers should also review the application criteria before applying for the loan. Some lenders restrict the availability of loans to individuals with a certain credit rating. For other people, there are bad credit unsecured loans and debt consolidation loans.

A loan may not always be the best option, depending on how much an individual wants to borrow. Some credit cards feature an interest-free period for purchases. If only £500 to £1,000 is being borrowed, the credit card is likely the lowest cost option because a regular loan for this amount usually features the highest rate of interest.

Credit card companies also may offer interest-free balance transfers, presenting a no-cost solution for someone considering a loan to pay off high-interest debt.

As long as the balance is repaid before the introductory period expires, no interest will be charged. The interest-free period should be long enough to pay off the entire amount. Consumers should not use the credit card for any other purpose.

Automatic payment via direct debit from the bank account is an easy way to ensure that payments are made on time. Borrowers should ensure that the balance has been paid and reflected as such by the credit card company prior to the expiration of the introductory period.

Though this may go without saying for some people, payday loans should be avoided. This short-term financing is designed to be repaid with the next payday and features an enormous rate of interest. The result is that borrowers end up paying far more than the loan amount, even for a very short loan.

Credit card cash advances should also be passed by, as these feature a fee that is sometimes a percentage of the amount advanced and a high interest rate that begins accruing the day the advance is taken.

Anyone with an existing bank account may think that this bank will provide the cheapest personal loan. This is not always the case, as banks are competing for new customers. Individuals may find more flexible repayment terms or a lower APR from another bank.

This makes it even more important to shop around before applying for a loan. Consumers can still remain loyal to their bank while taking out a loan from another institution.

The loan term is the amount of time provided to repay the money owed. Longer-term loans are more expensive because interest is paid for a longer period. To illustrate, a £5,000 loan featuring a five-year term and eight percent APR equates to £2,000 in interest overall.

If the same amount was borrowed for only two years, total interest would be £800. Consumers can choose to quickly pay off the loan but will face higher repayments. With a lower repayment, they have a longer loan term but the overall interest paid is higher.

It is recommended that only fixed interest rate loans be considered. In this arrangement, the rate of interest applied to the debt remains the same over the term of the loan. At the start of the loan, the borrower knows how much he or she must repay and this figure does not change.

A variable rate loan may experience an increase in interest rate at any time during the loan term. This makes it more difficult to budget because the amount of interest charged each month can vary.

Payment protection insurance (PPI) has recently received a lot of media coverage. If a borrower loses income and is unable to repay the loan, PPI will cover loan repayments according to specific terms and conditions.

Rather than accepting the PPI offered as an add-on to the loan cost, a borrower should shop around for a policy, if PPI is desired. An independent policy that covers all expenses is often more cost-effective than a quote from the lending institution.

Watson F

I worked at a credit union. They seemed stressed. I don't know why.

Love my Meyer

Yes, talk to the manager of where he works.

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