What should you consider when getting a mortgage loan? The mortgage loan should fit your needs and lifestyle and allow you to sleep at night.

The “typical” loan rate you see might not be what you get. You may not always get the advertised typical APR on a personal loan. The rate you are given can depend on your credit rating, so always check this before applying for a personal loan, as the rate you end up getting could add to the cost of your monthly personal loan repayments.

Early repayment penalties can add to the cost of your personal loan. Paying off your personal loan early can save you hundreds of pounds in interest; but this can easily be wiped out if your personal loan provider charges you an early redemption fee. So check this out before you apply for the loan even if you don’t think you’ll repay the loan early, as most people do.

Payment breaks add to the cost of the personal loan. Many lenders will allow a break between when you receive your personal loan and when the first payment needs to be made, or will allow you to take a payment break during the personal loan term. Interest is charged during the payment break period, adding to the total interest payable.

Avoid unnecessary charges like “same day funds”. Some personal loan lenders offer same-day-funds facility which means you get your money on the same daythat you complete the application, but the fee for this service can be as much as £50, which becomes even greater if it’s added to the amount you borrow!

Never

Pay on time. Most personal loan lenders need a direct debit to pay the monthly installments on your personal loan, but make sure you have enough money in your current account to make the payment; otherwise the charges for missed payments can be as high as £38.

Avoid Payment Protection Insurance

You don’t have to take out Payment Protection Insurance. Many personal loan providers will offer Payment Protection Insurance (PPI) which will pay a percentage of your bill in the event of you being unable to work as a result of accident, sickness or redundancy. You are not obliged to take it, and you can even take it out separately if you find you need to. You can use our personal loan best buys to compare the cost of a personal loan with PPI and without PPI.

Use a 0% Credit Card for cheap loans

Providing you can make the purchase on a 0% credit card and will definitely pay it off before the 0% on purchases credit card deal ends that could be a better option.

Avoid TV Loans offers

Be even more careful with TV low monthly repayment personal loans. These secured loans advertised on TV are stretched over many years, meaning the debt is stretched over many years resulting in you paying more and more interest costing you a fortune.

Shorter the repayment periods

Less is more. Borrowing over a longer period can decrease the monthly repayments, but it massively increases the interest you’ll repay.

personal loans tips

Whether it’s unsecured personal loans or secured personal loans, there are a few little things to be watch out for when you are considering a personal loan.

Fees

Make sure you understand all the fees involved with your loan.

• Arrangement or set up fees are charged by some lenders right up front. For secured loans, these can be pretty hefty.
• Early repayment fees may also be payable particularly in the early years. If there’s a possibility that may be able to pay the loan off early it’s a good idea to understand these up front or take a loan which doesn’t charge these fees.
• Administration fees will be charged in the event of missed payments, so make sure you’ve always got enough in your current account to meet the monthly direct debit.

Monthly Repayment

Payment Protection Insurance

• Payment Protection Insurance (PPI) is designed to make sure you can make your loan repayments if you can’t work due to illness, accident or unemployment. PPI can be a valuable purchase if you buy the right policy.
• PPI is optional and you should shop around if you intend to take this insurance out. The policy your lender offers you might not be the best value, or the best quality of cover.
• Most PPI policies bought from the lender are paid for by a lump sum premium which is added to your loan. So you pay interest on the premium and may not get a full refund of the premium if you repay early
• Don’t buy the PPI the lender offers you. It can be a valuable insurance to have, so go to an independent broker who can get you a better product which is suitable for your needs.

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.

There are 2 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.

Consider Insurance

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.