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Cheap loan tips
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As the global credit crisis continues, it is impossible to ignore the fact that lenders are tightening their purse strings. It has recently become harder and harder to get a personal loan and with the media full of stories about those who can't get credit, it might seem like an immediate solution to the problem is going to be difficult to find.
The personal loans market has become tougher, especially over the last three months. Over the last year, a loan provider has dropped out of the market at the rate of one every month. Since the beginning of this year, 27 changes have been made to personal loan products on the market and according to price comparison website Moneyfacts.co.uk, these have mostly been interest rate increases.
Those lenders that are left are now using a "personal pricing" system to set their own interest rates. By using this system, lenders are able to charge their customers interest according to the borrower's individual credit rating rather than charging the advertised rate. This means that, for customers, comparing the different loan options available becomes more difficult, even when using price comparison websites.
Even though the Bank of England has cut the base interest rate twice since the beginning of the credit crunch in July last year, interest rates on financial products such as personal loans, car loans and mortgages have continued to rise. The backlash from the credit crunch has left banks trying to conserve the funds they have. Consequently, they are more unwilling to loan money to each other or to engage in risky business deals – including loaning money to someone who potentially may not be able to pay it back. Those who are approved loans also have to pay more for the money they are borrowing.
For those who have a bad credit rating and have been refused a loan, there are things that can be done to ease the financial stress this may cause. Certain price comparison websites will offer you loans based on your personal circumstances that are currently available from lenders they represent. This allows you to compare what is available and usually includes bad credit loans and debt consolidation loans in the list of options you will be offered. Taking out a secure loan will usually mean you are offered lower interest rates. Since you have to secure a piece of property against the value of the loan – usually you home – there is less risk involved for lenders so they are more willing to decrease rates.
Credit cards are another option to help manage your finances. You will probably need a good track record with past credit to be approved a card with a lower interest rate, but a lot of people find them indispensible. Whereas you are required to pay back loans within a set period of time, with credit cards you have far more flexibility. As long as you pay back the minimum amount specified by the card provider each month, you are still able to borrow up to the limit. You can also pay back varying amounts at different times, although some providers might charge you a fee if you choose to pay back the full debt in one go. Credit cards are also different from loans in that the interest rate you are being charged can change. If you have a card, it is always a good idea to keep an eye out for the best deals around so that if you need to change card providers at some point you can do so quickly. Credit cards are good as a way of getting short term cash so if you are looking for money to purchase things then a credit card will most likely suit your needs. If you are looking to finance long term projects such as home improvements though, it is probably better to look into the loan options available.
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