The personal finance market is overflowing with new entrants that are releasing loan products that address many different niches. This means that there is more choice than ever, when you are considering taking out a loan and there is also competition on the best deal that each player is prepared to offer the people in their target markets. Interest rates are at historic lows so there are some very positive products available that can allow you to finance a purchase or to refinance high interest rate debt that you already have.
General Things to Consider When Taking Out a Loan
Check different providers
It is always important to make sure you find the best deal on offer. Your current provider will likely tell you that they are giving you the best possible rate with the lowest fees and charges and best conditions. You cannot be sure without checking out the competition and you will be amazed how much better a deal you can negotiate when you show them what you can get elsewhere.
You should always compare like for like products so that you can take into account any other differences. This may include fees, charges and special conditions.
Read the fine print
As with all products it is important that you read the fine print so that you understand any conditions that the offer is made under. Sometimes there are onerous conditions that can mean if you can face large penalties and additional fees if you do not do exactly as you agreed to when you sign the contract.
Can you pay out early without penalty?
One thing that you might not consider when you are taking out a loan is what happens if you make extra payments or payout the loan early. This can happen for many reasons and some providers have exclusions that mean you end up paying the entire interest even if you pay the loan out early. It can be advantageous paying a small premium to ensure that you have full flexibility in making early payments.
Only apply for the loan you want
An area that some people are getting caught out on is making several loan applications at the same time. This sounds like a good strategy as you can then select the approved loan that gives the best deal. Unfortunately the problem is that the large number of loans appearing on your credit report can make it seem like you are in financial difficulties or are desperate for a loan. This can mean that you are refused a loan or because of increased risk offered a loan at a higher rate.
Understand secured loans
There have been a lot of loan products that use many different names but are in reality are second mortgages. These use the equity that you have built up in your home to offer very low interest rate loans. This can be advantageous because of the low repayments to they allow. The downside is that if you default on the loan then the house can be sold to repay the loan even though your mortgage is up to date.
Tailor your loan amount to ensure the best rates
With increase competition many loan providers try to attract certain customers by offering special rates on certain loan amount brackets. This can mean you can borrow slightly more or slightly less and obtain a significant discount on the loan rate offered. The use of market research has meant that there are specific offers put to the market that are aimed at a particular customer group and you can take advantage of this by ensuring you put yourself in this group.
Specifics to Look At When Taking Out a Loan
Check your credit report
It is always a good idea to make sure that your credit report has no mistakes or incorrect information on it. It only takes one adverse rating to lower your credit score so that you are refused a loan or offered a loan at a much higher rate. If anything on the report is incorrect then ensure it is removed or corrected so that your loan application is seen in the best possible light.
Can you get a better deal with a credit card?
The credit card market is saturated and many companies use low or no interest deals to attract customers. This may mean that you can use a credit card instead of taking out a loan and still save money. It is important that you fully understand the conditions so that you do not unintentionally move outside the offer conditions and have the entire amount moved to the full rate fee.
Do you need loan protection insurance
One area of taking out a loan that has received a lot of attention in the media is loan protection insurance. It can provide a low cost peace of mind but some companies are requiring expensive insurance provided by a related company as a way to make up for the low interest rate on offer. It is vital to only agree to this if it is what you want and is at a competitive price.