Personal Loans - Tips To Get The Right Loan For You

Article Category: Finance

Whether it's to replace a rapidly ageing motor, extend the house to accommodate a new arrival to the family, take advantage of a business opportunity or deal with an unexpected emergency - there are times when we all need to get our hands on a large chunk of extra cash. Personal loans are one method of making the impossible possible, but it's hugely important to make sure you get the personal loan that's right for you to avoid problems in the long term.

The golden rule for personal loans

If there's one rule to follow with personal loans, it would be this: take out the smallest loan you can and arrange to pay it off as quickly as possible.

Try to whittle your personal loan borrowings down to the amount you absolutely need - could you supplement your loan with more flexible borrowing on credit cards or an overdraft? Remember, a bigger loan taken out over a longer period of time may keep your monthly repayments down, but the actual amount of interest paid back over this time will be far more than if you were to borrow the same amount over a shorter term.

Our handy loan calculator can give you a monthly breakdown schedule of loan repayments and split of the interest and capital repayment amounts.

Don't send off multiple loan applications

Do your research and identify the right loan for you before you apply, rather than haphazardly sending off loan applications in the hope of being accepted by one lender. Each personal loan application will trigger a search of your credit report and lots of applications in a short period will make lenders suspect you're scraping around for money, or even planning a fraud, making them far less likely to approve your loan application.

Secured loans vs unsecured loans

Whereas a 'secured' loan may sound attractive, in reality it's far more beneficial to the lender as, if you can't make your payments for any reason, they will be able to claim your house in recompense.

Another reason to opt for an unsecured, fixed rate personal loan is that you get the peace of mind of knowing how much your loan payments will be each month and can start to plan ahead. Variable rate secured loans may look like a cheaper option when interest rates are low but can spell trouble if rates, and with them your monthly payments, suddenly start to shoot up.

Payment Protection Insurance?

Payment Protection Insurance (PPI) has received terrible press in recent times through various mis-selling scandals. However, if you want the reassurance that in the event of redundancy or illness your loan would be paid off, source the cheapest PPI through an independent specialist insurer rather than via your loan lender. To make sure you get exactly the coverage you need for your loan - read that small print!

» Work out figures for a loan with our loan calculator.