You can save money on personal loans and other financial products by shopping around for the best deal.
Best personal loan - rate
Rates for loans can range from 5.5% to more than 20%. This makes a difference of more than GBP50 per month, or more than GBP3000 over the life of a GBP10,000 loan.
This shows that you shouldn't take out the first personal loan you see. But not everyone will get the headline rate, so you should check the rate you are actually given to see if it is still a good deal. The rate you get may depend on how good your credit is. This is a way for lenders to figure out how creditworthy someone is.
Best personal loan – penalties for switching
If you want to switch from one loan to another, you should find out if you will have to pay an early settlement penalty. If you do, you may lose any money you could have saved. This is true for fixed-sum loans that are governed by the Consumer Credit Act of 1974 and were taken out on or after May 31, 2005. If the loan is paid off early, the lender may charge a 30-day or one-month interest penalty (based on a set formula). This is true if the original loan term is longer than a year and the advance is less than GBP25,000. For terms of less than one year, there is no penalty for early payment. The Consumer Credit (Early Settlement) Regulations 2004 cover this penalty, which is written into the rules about paying off loans early. If you take out a loan before this date, you may have to pay more in fees.
Best personal loan - Payment protection insurance
You should also think carefully about whether or not to get insurance to cover your loan payments. This pays your monthly loan payments if you can't work because of an accident, illness, or being laid off. This can make your loan payments much more expensive each month. Insurance is always given by the lender, but you can also get it from a broker who works on their own. With a stand-alone provider, you can be sure that the insurance has not been added to your loan and interest has not been charged on the new balance, as happens with some lenders' insurance. There are also a lot of different prices for this insurance, so it is best to do some research first.
