Finding the Right Loan

Your first stop on the road to finding a personal loan should be those banks or building societies at which you already hold an account, since many banks in the UK offer lower interest rates to existing customers. You should also look at the products on offer by the many financial institutions around. All of this information is readily available on the internet. The loan providers we recommend are displayed in our tops lists so this may help you get started. There are various parameters to consider when choosing a loan, the most important being the Annual Percentage Rate (APR). Since the APR is a measure of the true interest payable on a loan, you should use this figure to directly compare one loan with another. Other important factors include monthly installments, repayment periods (or loan terms), as well as the reputation of the lender.

Most loan products are relatively flexible allowing you to choose a loan amount and term that best suits your needs. The APR may vary depending upon the payment scheme so if you are comparing loan offers from different lenders, be sure to compare the APR quoted next to the equivalent payment schemes or the payment schemes you would consider.
Let us consider the different types of interest you may encounter:

1. Fixed Interest - A fixed interest rate remains the same throughout the repayment period. This means that your monthly installments also remain the same.
2. Variable Interest - A variable interest rate may rise and fall according to the Bank of England base rate.
3. Set Interest - A set interest rate is given to all successful applicants regardless of the risks involved, loan amount and repayment tenure.
4. Typical Interest - A typical interest rate depends on loan amount, repayment term, and individual circumstances.

As well as measuring the amount of interest charged, the APR includes most other additional costs involved such as broker fees. However, you should also consider those costs that are not included, such as redemption penalties, all of which will be included in the loan agreement small print. Another consideration is the Equated Monthly Installment (EMI). Personal loans are payable on a monthly basis with some lenders permitting lump sum or over-payments without penalty. In the case of prepayment, you will be given the options of reduction in either EMI or tenure. Here you should opt for a reduction in tenure because a longer tenure translates into more interest.

For some people, due to their financial or personal circumstances, finding a lender that will approve them for a loan can prove difficult. A bad credit history, County Court Judgments, frequent changes of address, or self-employment are all factors that adversely affect the ability to secure credit due to an increased risk to the lender. Whilst there are some lenders that will approve loan applications where others refuse, this often comes at a price with respect to higher interest rates and charges.