Three Easy Steps To Getting The Best Personal Loan
Written by: Gary Tallon
Despite what you might think, getting a personal loan doesn't
have to be a difficult process. Whilst it's true that you have
hundreds of options open to you and an often bewildering number
of choices to make before you put in a formal application, it's
quite easy to make sure you make the right decision at the right
time and that you also save yourself time and money into the
process. There are basically three steps you need to take before
you choose the loan that's right for you:
Step One - Know what you want
The first thing you need to do is to decide which kind of
personal loan will suit you and your circumstances best. For
example, if you're a homeowner then you can look at taking out
either a secured loan or an unsecured one depending on your
preference. If you don't own your own home then you will
probably be limited to an unsecured loan.
Secured loans are given to property owners and will use your
home as a guarantee against the money you borrow. So, if you
stop making loan repayments, your lender can use your property
to recover their loan(s). Because you'll be using a guarantee
you'll generally be given better (i.e. lower) rates of interest
on the money you borrow. Unsecured loans, on the other hand,
don't need you to be a property owner as there is no guarantee
involved. This lack of guarantee does make the loan slightly
more expensive and may also give you restrictions on how much
you can actually borrow although this does vary from lender to
If you're not a property owner then this kind of unsecured loan
will generally be the only option open to you but it's worth
remembering that many homeowners now prefer an unsecured loan to
a secured one in any case as they don't want to risk losing
their property if things go wrong down the line.
Another choice you'll need to make here is whether to take out a
loan with a fixed or a variable interest rate. If you are given
a fixed rate then your monthly repayments will stay the same all
of the time. A variable rate, however, may see your repayments
change if underlying interest rates change at any time.
Step Two - Stick to what you can afford
It's quite easy to raise finance in most cases and it's very
tempting to borrow more than you actually need simply because
you can. It's really important therefore that you work out
exactly how much you need to borrow and how much you can afford
to repay on any loan. The key thing to remember here is that it
not a lender's job to work out how much you can afford - it's
your job! You can't blame your lender later if they let you
borrow more than you can afford to repay.
The easiest way to do this is to look at your monthly outgoings
and to work out how much cash you have spare once you've met
your existing financial obligations and spending for the month.
This sum is basically what you can afford to pay as a loan
repayment every month. It is, however, worth noting that you
should always leave a bit of cash spare for emergencies - so you
shouldn't commit all of your spare cash for loan repayments but
should also leave a bit to cover you along the way.
You can then check if your spare cash and loan amount needs
marry up OK by looking at an online loans calculator, for
example. These tools will let you work out how much average
repayments may be or how much you can borrow based on a
Step Three - Shop around for the best deal
Your average personal loan product may well look exactly the
same as the next one you look at but that doesn't mean it will
cost you the same. Interest rates can vary widely across the
industry and you can end up paying a lot more than you need to
unless you shop around for the best rates.
The majority of loans will all do the same things and will carry
exactly the same terms and conditions. So, if you bear this in
mind, you'll get no advantage by paying a higher interest rate
if there are no add-on benefits. The easiest way to shop around
nowadays is, as ever, via the Internet. Even if you just spend a
few minutes on an online loan rate comparison site then you'll
see some big differences in the interest rates being charged.
And, remember, the lower the interest rate you pay, the lower
your monthly repayments will be. And, the less you pay back
every month, the less you'll pay back overall. This all adds up
to savings for you.
If you follow these three steps then you'll be well on the way
to finding exactly the right kind of loan to suit you best - and
you'll make sure that you make the kind of savings you can with
minimum fuss and effort.
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