Things to Keep in Mind When Applying For a Loan
Are you looking to apply for a loan to consolidate an existing one or make a big purchase? Well, as with any major decision, it is important to do your homework before applying for a loan. That said, here are some important things to keep in mind when doing so:
Loan Rates Have Been Declining
Since the beginning of the year, the representative APRs or annual percentage rates on the best deals have been declining. This is great news if you are looking for a low-cost loan. There are fast commercial loans Hampshire.
People looking for a loan between £7,500 and £14,999 can apply for low rates, which have been available for the past several years. For instance, if you want to take a £7,500 loan for over 3 years, Sainsbury’s Finance imposes a representative annual percentage rate of 7.1%. This is a substantial reduction from the previous year’s 8.3% APR. At this rate, the monthly payments would be £231.16, resulting in an £822 total charge for credit.
Check Your Credit Score
Not every bank or financial institution will allow you to take a loan. Some will even impose a higher annual percentage rate than normal as they deem you to be riskier. So, when figuring whether you can afford a loan, check your credit score and have a realistic idea if you will be offered the representative APR.
Avoid Applying for Multiple Deals
If you are not certain which lender will offer the best annual percentage rate, you might be tempted to make lots of applications at the same time. However, this is usually a bad idea as the applications will appear on your credit history. This worries lenders as they think you have been rejected for other loans, which may not be the case.
Thankfully, Nationwide will just run a soft search of your credit history before making an offer, and so, you will be able to see the rate you will get without affecting your credit score.
The Best Rates are Not Always Direct
Most people think that approaching the lender directly for a loan is cheaper, but this is not always the case. For instance, Nationwide’s 7.3% APR isn’t available through the institution’s website.
Similarly, Alliance & Leicester’s 7.2% rate can only be accessed through price comparison websites and not to those who approach the bank directly. The same applies to Santander personal loans, with a representative annual percentage rate of 7.3%.
Borrowing More can Cost Less
Since the APR is lower if you are looking to apply for a loan of £7,500 or more, it’s actually cheaper to apply for a slightly higher amount if you need about £7,000.
For instance, if you are looking to borrow £7,500 over 5 years, the cheapest rate is 7.2%, which will cost you £1,405 over the period. However, if you borrowed £7,000 for the same period, the cheapest rate you will get is 8.5%. This means that the total charge over the term will be £1,554. As such, it makes sense to get the additional £500 and put it towards your monthly repayments.
You Can Save Money Through Consolidation
As mentioned above, the more you borrow, the lower the APR. As such, if you have a small loan, plus store and credit card debt, you may want to consolidate that borrowing so that you can get a lower rate overall.
This could see you saving hundreds of points in interest. Additionally, it makes it easier to stay on top of your money!
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