If your e-mail inbox is anything like mine, then you will be inundated with a continuous chain of loan offers. For a country supposedly in masses of money trouble, there seems to be no shortage of people wanting to throw their money at us.
What some people are unaware of when considering their loan is the vast differences in varieties of loans. It is likely that loans seeming too good to be true – probably are.
Banks aren’t always the most reliable source when it comes to reassuring you they have the best rates, which is why you should always shop around to ensure you get the best deal on the market.
The key is to get a full quote from all legit lenders and compare all terms and rates. Only then will you be able to see clearly what you can afford to borrow (and of course pay back on time) and where will give you the best deal.
What to compare
There are so many different terms used when talking about a loan, and it is easy to get confused. However, it is something you must take the time to understand otherwise it could cost you in the long-term.
APR
APR stands for Annual Percentage Rating. This is the major checkpoint when making a comparison, with the lowest APR being the best for you.
Loan Term
This is the duration of your loan. A loan with an attractive APR may in fact be for double the loan term, meaning you will pay back far more. However, you may need a longer term in order to make repayments.
Interest Rate
Interest rates can be either variable or fixed. Variable rates make it hard for you to predict exactly what you will pay back as the interest rates are likely to rise and fall at the lenders digression. Fixed rates, however, means that the interest rates on your loan will remain the same throughout the loan term.
Total Loan Cost Vs Monthly Repayments
The total loan cost is self-explanatory, gained from adding together the loaned amount and the total interest. This should then be compared to the monthly repayments, which need to be affordable, yet not detrimental to your finances in the long term.
Payment Holidays
Payment holidays give you the option to put off a payment until the following month. This often comes at a cost though, with the loans coming in as a far more costly option.