A guide to Loans
WHICH LOANS IS RIGHT FOR YOU
Thinking about taking out a loan? Most people who take out loans will generally take out a personal loan.
This is usually done through their bank, building society or specialist loans company. However there are other outlets such as supermarkets so it is important to do your research and shop around.
Depending on your current financial situation such as your salary, if you are a property owner, etc. you will be able to borrow anything from £500 to £25,000.
If you own your own home you can opt for a secured loan. This means that any loan you take out is guaranteed against your home, so if you can’t keep up with the repayments you could end up having to sell your home. It is usually easier to get the loan amount you want with a secured loan but with the risks highlighted before.
An unsecured loan is not tied to anything but if you do fail to pay the loan back you will have a bad credit rating that could prevent you from obtaining credit or a loan in the future.
When choosing a loan you should pay careful attention to the APR, the Annual Percentage Rate, this is important because it tells you how much you are paying back. When comparing APRs, make sure that you're comparing like with like. Don't pay attention to the monthly interest rates advertised by shops - these are always lower than the annual rate and can mislead you into thinking you've got a better deal than you really have.
Before going into process of obtaining a loan it is a good idea to sit down and work out exactly how much you need, the amount of monthly repayments you can comfortably afford and over what period. This is good practice as you should not borrow more than you actually ideally want or pay back over a longer period than you possibly could. The longer the repayment period, the more interest you will pay, so go for the shortest one you can manage. The larger amount you borrow will usually mean the lower the interest rate. But paying back larger amounts also typically takes longer so be wary of taking out more than you need just because of better rates, paying back a loan as quick as you can is a good goal to have.
Loans are repaid in monthly installments over an agreed period. This amount of time is usually fixed and if you want to pay off the loan earlier you might have to pay a penalty. Flexible loans, which let you pay back the money whenever you want, are becoming more common but the interest rate charged is often higher.
If your bank or building society turns down your loan application, it is obliged to explain the main reasons for doing so. Also there are a number of agencies that can check your credit rating and the reasons why, so you can be sure information it contains is up to date and accurately reflects your situation.
So if you have been refused credit it might be because you have a poor credit rating that may not be valid. If you think your credit rating is based on inaccurate information you can take steps to rectify the anomaly.