Tips on taking out a loan

Borrowing is a part of everyday life however there are many factors to take into account when taking out a loan so that you borrow sensibly.

Here are some hints on what questions to ask and what to look out for when arranging a loan.

Do your research

Spend plenty of time researching before making an application because each time you apply for a loan your credit history is checked and this can in turn lower your credit score.

Gather together the offers from each lender and compare the loans using the APR (annual percentage rate), length of the loan, the total amount repayable, in addition to the monthly repayments.

Make sure you understand the costs, charges and terms and conditions of the loan agreements.

Check for penalty charges

Read the small print carefully when arranging your loan and check for penalties for late or missed payments or for early repayment of the loan. By paying your loan off early you will save money on the interest you would have paid but there may be a penalty charge.

Fix your interest rate

By taking out a fixed rate loan you set the repayment rate for an agreed period of time. This will vary depending on the size of the loan, and it also protects you from rate increases and market fluctuations and helps you stick to the budget you work out at the time you agree your loan.

Useful website: Money Advice Service