Before taking out a loan read these tips.
- Get the background info
- APR (Annual Percentage Rate)
- Be realistic
- Read the small print
- Be prepared
- Don’t bury your head in the sand
Get the background info
Loan types
There are two main loan types available for borrowers:
Unsecured personal loans
This loan type is repaid each month with added interest, which is usually fixed. You’re not required to offer any security to the lender such as your home. If you default on payments the provider will need to take you to court to recover the debt.
Secured homeowner loans
This loan type is a personal loan which is secured by a second charge on an already mortgaged property. These loans need to be entered with great care. If you fail to repay the debt, you could lose your home.
APR (Annual Percentage Rate)
Your loan will have an APR, which is the Annual Percentage Rate. The APR will include not just the loans interest rate, but also any additional set up charges showing the true cost of the loan. Before entering into any loans agreement, please make sure you know and understand all the facts about the deal.
Be realistic
- Never borrow more than you can afford to pay back each month.
- Never apply for more than one loan at a time.
- If you can afford to pay back a loan over a short period do so. You’ll pay far less interest.
Read the small print
Always check the small print of any agreement for additional charges such as a penalty fee for early repayment of the loan.
Be prepared
- If you fall ill or lose your job you’ll still need to repay your loan, so consider taking out loan insurance to cover your payments.
- We can include the cost of cover protection in all loans in our comparison service.
Don’t bury your head in the sand.
- If you’ve problems with repaying a loan always contact your lender as soon as possible. If you’re up front about problems they’re more likely to be sympathetic and helpful.
- Please remember if you default on payments for an unsecured loan you could end up being credit blacklisted, which could affect your application for a mortgage or credit card in the future.
Hopefully these loans tips have helped you understand how to make an informed choice about which lender and loan type is best for you.
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