When it comes to taking out a personal loan, there are many options available out there. But with so many choices, how can you find ‘the one’? While the interest rate may be a key focus, there are other important considerations. Here are some key things to look at…
The interest rate
The interest rate you are offered will depend on a variety of factors, including your credit history, how much you are borrowing and whether you have security. So, if you are looking for ‘the best’ rate, make sure you factor in all of these criteria.
However, while the interest rate is crucial, it is relative to how much your loan payments are and, importantly, the term of your loan. Repayment affordability can be a better guide to whether the loan is good for you or not. The ‘cost of funds’ rate will show you how much the total interest and fees and charges are, relative to your loan balance.
Understand how fees and charges work
Besides the interest rate, there are other fees and charges that you need to consider when shopping for the right personal loan. For example, a lender may advertise a low interest rate, but then have a high establishment fee, late penalty fees or other monthly fees.
These costs might include a setup fee, a security registration fee and an account administration fee. At Loanspot, we have access to a range of lenders, so we can help you to source the loan that meets your needs – telling you all the fees associated with the loan upfront.
While with most lenders you can save on your interest if you repay your loan early, a setup fee is a ‘sunk’ cost, which you will not get back.
Also, before taking out a personal loan, keep affordability top-of-mind. It’s a good idea to factor in the unknown ‘what ifs,’ and make sure that you can meet your repayment commitments, to avoid unnecessary fees and any negative impact on your credit rating.
Choosing a suitable loan repayment frequency is another way of tailoring your loan to your needs. Making your loan repayments on time is easier if you can set up the repayment frequency to match your income.
Check whether your loan payments can be made on a schedule that suits you; some lenders will set up your payments as monthly but allow you to make more regular payments.
Early repayment penalties
If you plan to pay off your loan quicker, whether by regular payments or one final settlement amount, check what fees or penalties might apply. Some lenders will allow you to make repayments with low or no penalties, while other lenders may charge higher penalties.
If paying your loan off quickly is your goal, then the ideal loan for you will allow those additional payments to be made with no penalty – otherwise, you might not be saving yourself much money at all by paying it off quickly.
Once you’ve decided what you need in a personal loan, talk to the team at Motor Vehicle Finance about your personal loan needs today. Contact us on 0800 666 021: We’re here to help.