When looking for finance, trying to compare personal loans is a good way to assess your loan options in detail and help you find the right personal loan solution.
How to Compare Personal Loans
You need a personal loan – a flexible, fast form of finance suited for many purposes. Not only is this form of credit incredibly versatile, it’s also one provided by hundreds, if not thousands of financial providers – both online and on the high street.
You need to compare personal loans, with the UK personal loan market, worth £23 billion and counting, it’s safe to say that you have a complicated task ahead if you wish to uncover the best personal loan for your needs.
Further complicating this challenge is the fact that when you compare personal loans, it is about much more than simply looking at interest rates. This guide breaks through the jargon and walks you step by step through the process of comparing personal loan packages
Start with Three Key Questions
Before searching for personal loan offers, ask yourself:
How much do I need to borrow? – The best personal loan rates are offered on more significant amounts, deciding on how much you need to borrow from the beginning can stop you from borrowing more than you really need.
How much can I afford to repay each month? – You should create a monthly income and expenditure budget if you don’t have a definite answer to this question.
If you’re consolidating your debts, what interest rates and charges are you currently paying across your debts? This will be important for ensuring a personal loan is the right solution for your finances.
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If you’re consolidating your debts, what interest rates and charges are you currently paying across your debts? This will be important for ensuring a personal loan is the right solution for your finances.
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Moving On – How to Compare Interest Rates
Most personal loans (also known as instalment loans) operate on a fixed APR (Annual Percentage Rate), however, there are also providers that operate on a variable rate that fluctuates in accordance with the Bank of England Base rate.
In comparison, fixed interest rates provide you with an upfront cost that never changes.
Currently, as the markets remain relatively uncertain, it may be advisable to choose a fixed rate to avoid any significant price hikes. Additionally, if you’re only just about able to afford the repayments of a variable rate loan, you should be aware that you won’t be able to cover the repayments should the rate go up.
5 Things to Check for when Researching Personal Loans
1 Choose and compare the right type of loan
Secured or unsecured? A loan with a guarantor or a loan without? If you’re unsure as to which type of personal loan will best be suited to your needs, start with our guide.
2 Whether you qualify for the advertised interest rate
Advertised interest rates only have to be applicable to 51% of applicants, so you should always confirm the interest rate that applies to you as an individual applicant.
3 Ask about arrangement fees
These are charged by some lenders and should be compared alongside the APR of the personal loans you’re comparing, as they are rolled into the APR, and won’t be reflected in the simple interest rate.
4 When researching a loan always request a quote before applying
Applying for multiple loans can impact your credit and, in the worst-case scenario, can eventually lead to you being refused credit (application after application can appear as though you’re applying for multiple forms of credit).
5 Always compare quotes and offers fairly
When comparing loans always use the same term, so that the loans that you receive quotes for run over the same period.
Need an always open form of finance?
If you need a loan that offers a continual form of finance, rather than having a set number of repayments, you should look for a revolving line of credit.
A Final Vital Pointer: Institution Reputation
It makes sense to compare providers, it’s essential that you compare rates, but beyond these elements, it’s critical that you consider the reputation of any financial provider you’re considering. Review websites are helpful sources of information in this respect. You can learn about our customers’ experiences by reading reviews on CashLady on Smart Money People & Reviews.co.uk.
Stacey Corrin
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