Looking For a Personal Loan – Read These Tips Fist

Understand The Potential Risk of Secured loan

Secure loans often get a better rate than unsecured loans, but this comes at a price. You will need to secure your home against the loan. This means in the event you cannot make the repayments the lender may need to sell your home to recover the debt. Unless you are 100% sure you can make the repayments for the duration of the loan, then don’t go for a secure loan. Secured loans are considered less risky for lenders but more so for borrowers.

Check Your Credit Report

Before applying for a loan you should really check your credit report first. If your credit file is not in good standing, then you may not be offered the advertised APR and will probably get a higher one. If your credit rating is low then it’s a good idea to fix this first, then apply. Even if your credit report is on the low side you can still get a loan; it just means you will have to pay back more.

Look at The Small Print

Before you submit your application check the small print of the loan to see if there are any stipulation for that rate. Some loans have certain requirements for the rate offered. For example Sainsbury’s Bank offer, a 5.5% rate but only customers who have a nectar card and used it in the last six months will be eligible for this rate. RBS and Natwest also offer their best rates to customers of their banking services.

Check Elsewhere

When taking out a personal loan, it will pay to shop around. When doing so, you will want to look at the APR which will tell you how much overall the loan will cost.

As a customer at your bank, you may be offered special rates, but you will still want to shop around as deals can be quite competitive, Sometimes up to 3% better on interest rates.

Pay the Loan of Early

If you can pay off the loan early, you may have to pay some fee’s Always check the contract before signing to see if there are any fee’s and what they cost. If you think you will probably pay off the loan early then, it may be worth finding a deal with a zero or low cost of early repayment.


With the recent PPI scandal in the UK, this has gotten some bad press. It’s still a very useful product to have for some people depending on your circumstances. PPI is designed to cover your repayments if you are in financial trouble as cannot pay them. By financial trouble, this means if you are taken ill or are unemployed. Don’t just take the PPI that is offered with the loan. You will probably get a better deal by shopping around. Also, PPI often has exclusions where you may not be covered, so it’s important to check the small print to find out what you’re covered for and what your not.

Other Forms of Borrowing

Before you make an application for a loan take a look at other forms of borrowing such as credit cards. Often this can be cheaper as credit card companies will offer you a zero percent offer on purchases for the first 12 months. Some like Tesco bank provide this for 16 months. If you think that the loan will run longer than what’s provided with a credit card, then you may find a loan is a cheaper option. Once the credit card offer has finished, the APR is usually quite high so the savings in the first 12-16 months may be less than that of the lower rate provided with a loan.

Borrow More Money

While this may sound counterproductive the more money, your borrow, the lower the interest rate. This is one of those cases where you can save money by borrowing a bit more. For example, a £7,000 loan over five years might 13.9% APR with a monthly repayment of £159.54. If you borrow £500 more, the APR will reduce to 6.4% so the repayments each month will drop to £145.76. Borrowing the extra £500 will save you around £829.20 over the full term of the loan.

Don’t Apply Too Much

When you apply for a loan, a mark will be left on your credit report. Lenders can see this so someone who has lots of searches could make you look like you are in need of money quickly or be in a bad financial situation. The lender will see this as more of a risk and may refuse your application. You should usually wait at least six months between application.