- Personal Finance
What to look for in a loan
What to be aware of when you take out a loan
If you have made the decision that you want to take out a new loan, it can be to cover an outstanding debt or to get a new car. You need to be mindful of the fact that when you look for cash loans you should review some things before you make a decision on which loan to take.
On an unsecured loan you should check the following things
1. How much interest you will pay over the time of the loan. Calculate the total amount repayable on the loan. Sometimes there will also be charges at the end of the loan, add them into the total amount repayable so that you get an accurate repayment figure.
2. Check the interest rate type. Most loans are fixed rate but if it is variable then your repayments will be at the mercy of the market rates.
3. Look for repayment penalties, a lot of people like to pay off their loans quickly and before the end of the loan term to reduce interest paid. If you intend to do this, factor in any repayment penalties so that you know exactly how much you will repay. Check if you can make lump sum payments over the lifetime of the loan.
If you want a secured loan, then you also need to check:
If there are any hidden costs, and if the lender has a good reputation. With a secured loan you are putting your property at risk so you need to be sure that you can manage the repayments. Look at the reputation of the lender, make sure you go with one that has a decent reputation.
Other ways a loan company will reel you in is to offer you cashback, these types of loans often come with clauses, they may not give it to you if you pay off your debt early. The cashback is also factored into the loan rate by the company, so be mindful they may give you the money at the end of the term of the loan, but you have been paying them the money to refund you!
Be aware of payment protection insurance, these contracts can be very vague and a lot of them are not worth taking out as they will not pay in most cases. Be wary of ppi with the lender, go with an independent broker
If the lender offers you a repayment holiday, be aware that the lender will usually charge you full interest from day one of the loan. You may not be paying anything yet, but your debt will be growing.
If you are sensible while considering your options, you can get a good loan deal, don't get seduced by flashy numbers and pay later schemes. Its your money, use it wisely.