Choosing the Best Loan
As with many types of credit there are different types of loan around. It may seem best to just approach the place that you normally bank with, but they may not necessarily have the best deal. It may be no easier going through them either, because although they know a little about you because you are a customer, all places do the same credit checks and so it will probably make little difference.
When you are taking out a loan the most important thing to consider is the cost. Think about the interest rate and the term and calculate how much you will be paying back on top of what you are borrowing. This is the total cost of the loan and can vary considerably from place to place.
It is likely that a lower interest rate will mean that you pay back less but there may be fees which increase the cost and the term of the loan will also determine the total cost. It is worth doing some calculation to work out exactly how much you will be paying to borrow the money and then you can do a proper comparison of the different options.
A loan with a variable rate may seem like a good option at the moment – with interest rates likely to remain low for some time, but if it is over a longer term then it may be less risky to go for a fixed rate. At least you will know exactly how much you will be paying back each month, with a variable rate the amount will change if the base rate changes and you may suddenly have to find more money to pay towards the loan which could cause problems for you. It can be a tough decision and a bit of a gamble.
If you do not know much about loans, perhaps never having had one before, then it might be a good idea to talk to an independent financial advisor about it. They will be able to explain to you about the different types and the advantages and disadvantages of each as well as introducing you to some of what they feel are the best deals around. It is worth bearing in mind that they are likely to recommend those which will pay them the most commission. Do not feel obliged to use what they recommend – make sure that you do your own research as well.
It is also worth considering whether a loan is the best type of credit for your situation, it may be better to use an overdraft or credit card – it all depends on the term of the debt. Do a few calculations with regards to interest rates and this should help you find out which will be the best for the amount of money you need to borrow and the term you will need to repay it.
