For example, how can you take out £500 greater than what you want and still save £829 over five years?
The price war for personal loans is heating up. In the last week, Derbyshire Building Society has thrown an open invitation to competitors by launching a rate of 5.6 percent on loans that range between £7,500 and £14.999.
According to analysts at the price comparison site Moneysupermarket, this is the lowest rate for headlines since November 2006.
Even though it is true that the Bank of England base rate has been at an all-time low of 0.5 percent for over three years, the rates for loans remain high up to now.
As rates fall and rise, we’ve come up with the 10 Ways to Get a Personal Loan.
#1. Shop all over
Like any other financial product in the case of getting a personal loan, it is advisable to look around and compare APRs. An APR (annual percentage rate) is the most accurate way to determine the cost of the loan, considering the amount of interest due, additional charges, and when the loan is due.
Your Bank may provide preferential rates for customers of its current account. However, it is possible to lower rates on loans in other places. For instance, existing Natwest customers can avail the rate of 7.9 percent – 2.3 percent higher than the rate provided by Derbyshire BS.
#2. Take a look at the print on the left
When applying to borrow money, read the fine print to determine whether you’re qualified. The best deals have hefty conditions. For example, Sainsbury’s Bank offers a loan rate of 5.6 percent. For instance, however, applicants must possess a Nectar Card or have utilized it at Sainsbury’s during the last six months. Natwest and RBS offer the best rate of loan to current customers.
#3. Be aware of early repayment costs
It could appear unlikely when you get an individual loan, but remember that you may be capable of paying the debt off early. Most loan companies will apply charges if you want to make a payment; therefore, it’s best to determine how much it could cost before applying for a specific deal. If you think there’s the possibility that you’ll need to pay off your loan in the early stages, you might consider looking for an offer that does not have any charges for early repayment.
#4. Look around for PPI
Payment insurance protection (PPI) has received some negative press, but it’s still a valuable product for specific individuals. It’s designed to help you pay for your monthly credit card installments if you’re unable to pay these due to illness or unemployment. Suppose you decide that you require this type of insurance. In that case, it is crucial to look around for the lowest-cost option: buying an insurance policy directly through your lender can cost more than buying it from an independent company. In addition, PPI policies often come with a lengthy list of exclusions. Make sure you know the details of what is and is not covered before signing a plan.
#5. Examine your credit rating
If you plan to seek a top credit card, it’s essential to check your credit score first. This is because loan providers are obliged to offer their advertised “typical” APRs to applicants who make up two-thirds. So, if your credit score isn’t good enough, You may receive a higher-priced deal than the lower rate loan you initially applied for.
#6. Think about the possibility of a credit card
Before you apply for personal loans, think about other types of credit. There is a chance that the cost of a credit card is lower, and a card that has an introductory 0% deal on purchases can allow you to spread out the cost of a large purchase without interest. The most extended 0 % offer currently available is for sixteen months away with Tesco Bank. If you’re not sure that you’ll be able to pay off your debt in the offer timeframe, you might prefer an extended-term low-rate deal. For example, you can use the Sainsbury’s Bank Low Rate Credit Card to provide an interest rate of 6.9 percent APR for purchases.
#7. Check out peer-to-peer lending
If you’re against banks, you may prefer borrowing from a peer-to-peer lending institution like Zopa. The website “a platform for the social loan” connects borrowers and lenders. The applicants are rated on their credit score and must have an excellent score. Rates can vary, but Moneyfacts provides an average of 6.2 percent on the £7,500 loan for three years.
#8. You can borrow more
Generally, the bigger the loan, the lower the interest rate. However, due to the way specific lenders price their loans, there are times when you can reduce costs by borrowing more. For instance, a £7,000 loan over 5 years from AA is advertised as 13.9 percent APR and the repayment of £159.58 per month. However, if you get an additional £500, the advertised rate decreases to 6.4 percent APR, and the monthly payments are less at £145.76. Thus, borrowing the extra £500 could cost you £829.20 for the 60-month loan period.
#9. Don’t make too many applications for loans.
If you are applying for a loan on the internet, most applicants leave a “footprint” on their credit file that lenders review before approving loans. The presence of many applications on your credit record can make you appear desperate or have financial trouble. In turn, lenders consider you to be more of an issue with credit, which means your most recent loan application will be less likely to get accepted.
#10. Be aware of the dangers associated with secured loans.
Secured loans are less expensive than unsecure loans. However, you risk the loss of your property if you can’t pay your loan on time. Secured loans are available only to homeowners who have equity in their home, and they effectively take an interest in your home. Therefore, don’t apply for a loan until you are 100% certain that you’ll be able to pay the repayments. This kind of loan is generally safer for lenders; however, it is riskier for borrowers.