A guide to choosing the right loan
Most of us will take out a loan at some point in our lives, whether it’s a mortgage, a secured loan or an unsecured loan. Here’s how to make sure that you get the best deal.
Understand the different types of loan
You can get a loan for anything from a house to a holiday, but in general there are two main types: secured loans and unsecured loans. In the case of a secured loan, the debt that you incur will be balanced against your house or another valuable possession. If you fail to meet the agreed repayments, therefore, you could risk losing your home. Unsecured personal loans, on the other hand, a consequence like this is unlikely.
Another advantage of unsecured loans is that they are generally at a fixed rate, which means that you will know exactly what you will have to pay back from the start. Secured loans, on the other hand, are frequently offered at variable rates, so your repayments will be affected by both the lender and national interest rates.
Deciding what you want
Before you begin comparing the different loans on the market, it’s crucial to work out how much you can afford to pay and for how long. It is best to borrow as little as you can and repay it as quickly as possible, so make a budget to determine exactly what you need and what repayments you can afford to make. There are a number of loan calculators online that will help you decide how much you can borrow at what rate of interest.
Finding the best deal
Many borrowers take out loans with their existing financial provider, but it’s best to shop around to see what’s out there. Find deals for loans online with a price comparison site, as well as comparing quotes from high street banks like Alliance and Leicester. Once you have identified the best deals, consider negotiating – many providers will match or better any offers you have had in order to keep your custom.
If you get into difficulties
If, despite your best efforts, you are having problems with repayments, then talk to your lender immediately. Explain your situation upfront, and you are less likely to be taken to court or lose your home. You may even be able to come to a compromise involving the reduction of monthly repayments. |
