How to save money on your personal loan

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.