Hints and tips on taking out a loan

Borrowing sensibly is the most important factor to take under consideration when taking out a loan.  Personal debt has recently been estimated at over £1 trillion and is set to rise in the coming future due to the recent economic climate.

To get finances in check sometimes people need to borrow money in the form of a personal loan and sometimes even a secured loan. There are a vast selection of loans that may be suited to an individual and sometimes it is difficult in deciding which loan is right for you. 

Our hints and tips section below will help you get the loan that is appropriate to your circumstances and also increase your chances of getting accepted without laying your self open to any hidden costs.

Research

Make sure a thorough research is carried out before applying for a loan as every time an application is made your credit history is accessed and this may lower your credit score. For example, some lenders will ask you why you need the loan, and the loan will not be approved if it is for things like cosmetic surgery.

Also compare lender rates (APR) and the total amount that will be payable once the loan agreement has finished; comparing loans will often give you the best deal.

Small print

Always read the small print as this can contain important clauses and conditions that might make you ending up paying more for the loan than you first thought.

Fixing the interest rate

Fixing your interest rate or taking out a fixed rate loan gives you a set repayment rate over an agreed time which obviously varies on the amount of the loan. A fixed rate loan will help you budget your finances better and also guard you from interest rate increases.

Using a loan broker

Using a loan broker can boost your chances of getting that loan and also getting the best deal possible, especially if you have a bad credit history.  Loan brokers may have close relationships with loan providers and may be able to give specific details that may help the initial application.

Income Protection

Make sure you take out income protection or payment protection as these products will provide a monthly income if you manage to lose your job, become ill or have an accident.  This will help to pay your loan monthly repayments until you are able to work again.

Paying the loan off early

You can pay your loan back before the agreement date but you will be charged an early repayment penalty.  There is no set amount to an early repayment penalty but usually it is 2 months interest of the loan. If you think you can afford to pay your loan off early then please check which loans apply an early repayment penalty and which don’t before applying.

Loan guide
What is a loan? Types of loans Hints and tips Interest rates Repayment Advantages and disadvantages Improving credit rating	"Borrowing sensibly is the most important factor to take under consideration when taking out a loan"