Loans. They can be confusing, can’t they? And when you have multiple loans to compare, things can get even trickier. So, to help you out, we’re going to run through the ins and outs picking the right finance option for you. From the key things to look out for to checking the small print, here’s where to start when you need to compare loans.
Are the monthly repayments manageable?
Before you hit search on a loan comparison site, it’s a good idea to have a monthly repayment budget in mind. Why? Well, because you need to be sure you can afford the loan repayments. If you can’t, it can cause a whole lot of stress and bother down the line.
Once you’ve got your budget sorted, you can compare the monthly repayment amount. Don’t be tempted to accept a loan you know you can’t afford. Stick to your budget and start the next stage of your comparison.
What’s the APR?
Right, this is the bit most of us find confusing. But don’t worry, it’s not that tricky to get your head around.
APR stands for Annual Percentage Rate. It represents how much it will cost to borrow money each year, over the term of your loan. Unlike an interest rate, an APR also takes into account any additional fees or charges.
So basically, when you’re comparing loans, you’re looking for ones in your budget with the lowest APR. You’ll also want to consider whether you want a fixed or variable rate. A fixed rate can help you plan your monthly repayments better and give you peace of mind. With a variable rate, your monthly repayments could go up or down. You could end up better off, but you need to make sure you have enough flexibility in your budget to accommodate potential higher repayments.
How long is the loan term?
The loan term is the amount of time you have to pay back a loan. A longer loan term will usually mean your monthly repayments are lower as they’re spread out over a longer period. But it also means you pay back more overall because of the additional interest you’ll pay.
So, when comparing loans, the right loan term for you will often come down to your monthly budget. If you can keep the loan term down, then great. But it’s more important to make sure you can comfortably pay back your loan and avoid financial difficulty.
What are the lender’s terms?
This is what you might think of as ‘the small print’. But when it comes to comparing loans, these additional factors could have big impact on your decision.
First, think about if there are any chances you might incur additional fees. By this we mean costs such as early repayment fees or late monthly repayment charges. Try and work out whether any of these scenarios that lead to extra costs might apply to you. For instance, is there any chance you’ll want to pay back all of your loan early? If so, compare the terms of the different lenders before you accept.
Can you be more flexible?
If you’ve got a budget in mind and the loans you’re eligible for aren’t quite what you’re after, you could think about being more flexible with the type of loan you’re searching for. If you’re after a personal loan for instance, you could consider a smaller loan amount.
If you’re homeowner, secured loans and mortgages are also an option for you. Secured loans might have lower monthly repayments over longer terms. However you also need to be aware that these types of loans are secured against your property, and a lender can take it away if you can’t afford to pay back your debt.
Your home may be repossessed if you do not keep up the repayments on a mortgage or any other debt secured against it.
Because your credit score isn’t affected when you compare loans through us, you can search for options as many times as you need to. If you need someone to talk you through them, we can help with that too. Give us a call on 0800 432 0142.
Ready to start your online loan comparison? Check your eligibility today.
If you want to know more about different ways to borrow, take a look at our small loans guide.