Do you need to take out a loan and are confused by the number of loan company offers – do not despair!
Personal Loans Now guides you through the complete process of finding the best loan rates; what to look out for, where mistakes can be made and tips to finding the best loan company to suit your needs.
- Reasons for personal loans,
- Finding a good deal on personal loans,
- Calculating the total cost of a loan,
- How online loan calculators work,
- Examples of loans and typical interest rates,
- Some facts about eligibility for personal loans,
Comparing Best Loan Rates
Unsecured Personal Loan Comparisions
Everyone wants a good deal if they are borrowing money. In this article, Personal Loans Now will look at how to find and compare the terms and conditions of like for like products using personal loan online calculators and other means.
Comparisons for unsecured loans are often made using only the headline APR. There are other factors to consider. One of the most important is the total cost of the loan. We will also look at eligibility for loan applicants and see examples of loans and interest rates.
Taking Out An Unsecured Personal Loan
There are many reasons why someone might want to borrow a lump sum in the form of an unsecured personal loan. Perhaps you need a new car to make your journey to work easier, or maybe there is a wedding or other special anniversary celebration to plan. Whatever the reasons, before you jump in and take out the first loan offered, it is a good idea to work out how much you can borrow and where you can get the best loan rates.
Getting the best deal on unsecured personal loans will not always mean getting the lowest interest rate. There are other factors involved to get the best loan rates. The total amount repayable is significant as are the terms and conditions of the agreement and the term of borrowing.
Finding a Good Deal For a Personal Loan
Whether you want to take on a guarator loan to improve your home or consolidate existing debts, finding the best loan deal is the place to start. While interest rates are at a historic low, loan companies offer those with a high credit score the cheapest loans.
The uncertainty that now pervades the economic markets due to the impending Brexit effect prices. Interest rates may rise in 2017 but will almost certainly go up the following year. So, looking for a fixed rate good deal should also be a mate of priority. To end up with the best deal possible and one that you can afford to repay, you can start your search by trawling through the offers of some lenders and drawing up a list of interest rates.
This initial search will show a myriad of offers and all of them look good. However, as has already been stated, not everyone will be offered the lowest interest rate. If you have a lower credit rating, be prepared to pay more than the advertised headline rate.
Unsecured Personal Loans Terms
One of the benefits of taking out an unsecured personal loan is that there is no requirement to put up any collateral. i.e. the lender cannot take out a charge on your home. However, the lender is taking on a higher risk than that attached to a mortgage. Interest rates for unsecured personal loans are therefore always going to be higher than home loans.
Calculating The Cost Of A Personal Loan
Applying for an unsecured personal loan has never been easier. An applicant no longer needs to make an appointment at the bank or building society. (These options are still available.) It is simple to apply for a personal loan online. However, this is the point when it is easy to be drawn towards a bad deal.
Loan companies may publish the monthly repayment figure in bold figures. Consequently, a potential applicant immediately thinks ‘I can afford that’. It is a simple and effective trap that lenders use to sell loans. You have to look deeper to see what is behind the rest of the contract. For instance, the term of the loan, the total amount repayable and any clauses that could add extra charges such as early repayment fees. Once you have the full information available for the best loan rates on offer you have better judgement for a decision.
How Does An Online Personal Loans Calculator Work?
There are many online personal loan calculators on money advice websites and websites where lenders advertise their products. Almost all lenders will display this kind of tool. Some of them are designed to work out how much you can borrow (an eligibility loan calculator), as well as showing results for the monthly repayment figure, the total interest charged, the total amount repayable and the interest rate.
Interest rates for personal loans are always shown as the Annual Percentage Rate (APR).
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The rate must be evident on paperwork and usually shown in a highlighted box. This is a mandatory requirement under regulations set down by the Financial Conduct Authority. It allows an applicant to compare rates between different lenders. However, looking at the APR does not give you the full picture.
An APR must include any setup fee and any insurance (PPI). Additionally, you may be offered different rates of interest for longer or shorter terms and also lower rates if you borrow a higher amount. It may be the case that a longer term loan is offered at a lower rate. It can disguise the fact that although the rate is lower, the customer will be paying more because the term of the agreement is longer.
How do I Find the Right Personal Loan
Looking at all the factors included in a deal will help you to find the best personal loans. Although it may be a little bit tedious, if you can take some time to look at the whole deal you will end up making an informed choice. Factors to consider are not just the rate of interest. Also, consider the length of the loan term and most importantly the total cost of the loan. See the example below:
|Interest||Loan Amount||Term||Cost||Monthly Repayment|
From looking at these examples, it is clear to see that the personal loan interest rate is not as important as the length of the loan period. And, it is also easy to see why you might want to go for a long term loan when you look at the monthly repayment figure. Also, you might be tempted to go for a higher amount of borrowing simply because the interest rate is lower.
|£1,000 – £1,999||From 9.5%|
|£2,000 – £2,999||From 6.9%|
|£3,000 – £4,999||From 5%|
|£5,000 – £7,499||From 3.6%|
|£7,500 – £15,000||From 2.9%|
|£15,000 – £20,000||From 2.9%|
|£20,000 – £25,000||From 3.3%|
Comparing interest rates is a good idea to find the best loan rates. But it is also essential to look at the whole package before you take out a personal loan.
I Need a Personal Loan. Am I Eligible
Some lenders have personal loan calculators that require information about your income, residency status, number of dependants, marital status and monthly income and outgoings. This kind of calculator can be helpful and assist in showing you whether you are eligible to apply for a personal loan.
Lenders use numerous facts to assess the eligibility of applicants. Even your postcode can make a difference.
Credit Ratings And Credit Histories
One of the most important factors is a credit rating or credit score. This is used by all reputable lenders to assess whether or not it would be ethical and responsible to lend you money. Credit reference agencies allocate a score to each applicant according to their credit history. Each agency scores differently and each lender uses a different set of criteria to assess an application.
Lenders can have access to and see personal information including employment details, how you have run your bank account, details of any missed or late payments for debts or utility bills and whether you have ever been subject to a court order for unpaid debt or been declared bankrupt.A credit report or credit record is a document that shows an applicants credit history and covers the last six years although in some cases it can go back further
Some companies will choose not to lend to you if you haven’t always managed your finances well and don’t have a good credit rating, while others might lend but charge you a higher rate of interest or offer you a smaller amount of credit. Comparing the different offers for an unsecured personal loan is always a good idea. As you can see the process is more complicated than it first appears. It is well worth the effort and can help you to stay out of large amounts of debt.
Summary: Best Personal Loans
In this section of the guide, Personal Loans Now looked at reasons for taking out personal loans and searching for best loan rates. Furthermore, we discussed the terms of unsecured personal loans and calculating the cost using online personal loans calculators. We looked specifically at; finding the right personal loan and provided examples of interest rates, terms, monthly repayments and interest costs The typical rates of lending for personal loans was also mentioned as well as some facts about eligibility for personal loans. Lenders look especially at your credit histories and credit scores. The number of applications made for different types of loans also affect your credit history and scores.Finally, you should take advice from the money advice services available for example, Citizen Advice , so you are informed of any changes in the rules and runnings of loan companies.