Published at 15:53, Friday, 30 November 2012

There’s always a risk of the unexpected happening. Perhaps you’ve had a new baby or you want to carry out some essential household repairs. One way of paying for these extras is by taking out a personal bank loan.

It’s never been a better time to take out a personal loan as they are now the cheapest they’ve ever been in the UK. Many people search on the internet every month for more information on bank loans. Looking at different products is a great place to start, but it’s important to remember that the rates you see online may not be available to everyone.

Shop around

As with any financial product, when it comes to taking out a personal loan it pays to shop around and compare APRs (annual percentage rates). The APR will tell you the true cost of a loan taking into account the interest payable and when the payment is due.

It’s also crucial that you check out your personal loan’s TAR (the total amount repayable). The TAR represents how much the loan will cost you, including interest repayments and any other charges or fees.

Check your credit rating

The bank will look carefully at your personal circumstances. Typically, this will include an assessment of your income and expenditure to make sure you can afford the repayments. Beyond that, your creditworthiness will be assessed by a reputable credit reference agency. These agencies gather financial information from borrowers in order to help banks and lenders asses the risk.

Lenders are only required to offer their advertised APRs to two-thirds of applicants. Therefore, if your credit rating isn’t in good shape, you may be offered a more expensive deal than the low rate loan you originally applied for.

Think about early repayment charges

It’s possible that you’ll be able to pay off your debt early. Many loan providers will apply a charge – commonly referred to as an Early Settlement Penalty – if you wish to do so, so it’s a good idea to check how much this might cost before you apply for a particular deal. If you think there’s a good chance you’ll want to settle your loan earlier than first stipulated, it may be worth searching for a deal that comes without any early repayment charges.

Consider borrowing more than you need

In general, the larger the loan the lower the interest rate. Due to the way some providers price their loans, there are occasions where you can actually save money by borrowing slightly more. However, always make sure that you only borrow as much as you can afford to pay back.

Check the small print

It’s important to check the small print for any extras, such as charges for obtaining your money by cheque or via a CHAPS transfer.

Choose the right loan for you

Loans are repaid in monthly instalments. The longer the repayment period, you more interest you’ll pay, so go for the shortest term that you can manage.

Published by http://www.eladvertiser.co.uk