Unsecured loans are a simple and effective financial solution for many people. However you still need to be aware of certain things so here is our make sure guide to the perfect loan.
- Make sure that you ensure the interest rate is fixed. Most loans do have fixed interest rates, but occasionally they can be variable so ensure you see the word ‘fixed’.
- Make sure you are aware of the TOTAL amount repayable or the TAR. So many people focus on the APR, however this is just the annual cost of the loan over a year, and is not necessarily an indication of how much you will pay back.
- Make sure that if comparing loans the TAR figures includes all costs, charges and fees so you are able to make an informed decision.
- Make sure you work out the total amount you need to borrow and stick to it. It can often be tempting to borrow more, especially if the monthly payment isn’t much different, but remember there will be additional costs and charges the longer the borrowing.
- Make sure you read the terms and conditions. It may be boring but could potentially save you money in the long term. Some unsecured loans allow for over payments without any penalties, and some may even allow you to repay the whole loan early without penalties, so it’s worth finding out this information.
- Make sure that you shop around. Unsecured loans aren’t only available from the banks. There are numerous lenders that are willing to borrow, so check online. If your credit rating isn’t the best then don’t let this deter you, there may still be lenders that are prepared to lend to you.
- Make sure that you consider all the alternatives. Could you save the money up perhaps? Or use a credit card? There are lots of 0% deals around at the moment, but again ensure that you are aware of all the terms and conditions, especially what happens if you miss or are late with a repayment. Those with good a good credit rating may also wish to consider peer-to-peer lending like Zopa.com
- Make sure that you understand all additional terms and any add on products. Costs associated with payment protection insurance, late penalties and fees must all be understood by you before you take out the loan.
- Make sure that you understand all the implications of any special offers or deals. Some loans offer ‘cashback’ or such things as payment holidays, but these may come with a cost which may work for your individual circumstances, so needs to be carefully assessed.