Comparing loans isn't just a matter of finding the cheapest loans that advertise the lowest interest rates. Here's how to get the best deal.
The key to loan comparison is taking into consideration all aspects of the loan regardless of whether it's a secured loans (loans secured against property or possessions of similar value) or unsecured loans (loans without this security).
Of course one of the most important aspects is the Annual Percentage Rating (APR) as this will determine the amount that you will have to repay.
Whilst it has already been said that this is by no means the only point of consideration for loan applicants, the interest rate is obviously something that you need compare.
It is important to bear in mind that the APR advertised for a loan isn't necessarily the interest rate that you will be charged.
Many lenders now apply risk based pricing whereby they set the rate of interest that's applied to your loan repayments depending on the amount you borrow and your credit rating.
The advertised APR also often applies to loans of a certain amount, borrow more or less than this and a greater interest rate will almost certainly apply.
Just to make it even more difficult for those trying to compare business or personal loans, these interest rates may be fixed (meaning that it will not change for the duration of your loan) or variable (meaning that it may increase or decrease depending should the lender change their Standard Variable Rate).
Providing you compare your options and choose the loan that costs you the least, choosing a loan with a fixed interest rate is likely to be better as you know from the outset how much you'll need to repay each month and overall.
You will, of course, need to check your eligibility as many lenders specify a minimum age, income and credit rating you'll need in order to get approved.
In some cases people who have previously had bad credit problems may struggle to get approved for the most competitive loans, particularly unsecured loans. However, with these recent economic crisis causing an increase in the number of people with this problem, more and more companies are offering loans for bad credit sufferers.
You also need to take into account the flexibility of the loan. For example, can you pay off the loan early if you wish or will you incur punitive charges for doing so? If this is a realistic possibility, paying it off early may result in substantial charges that makes the original discount on the interest rate a lot less attractive.
Banks are usually the point of call for most applicants because bank loans often offer competitive rates with the comfort of borrowing from a reputable provider. However, there are numerous loan companies out there so comparing all your options is a must if you want to get a cheap loan.
You can use our loan comparison to compare the headline interest rates applied to all the loans on offer and find the best loan rates available to you.
One tip for comparing cheap loans is to narrow it down to the lowest 5 or 6 interest rates and then look at their terms, flexibility etc to see which if any, best suits your circumstances.
By taking into account the interest rates and the terms of repayment including time period (it's generally best to go for the shortest term you can comfortably afford) you can create an overall view of the loan and quickly see which look best for you.
Once you've found the cheapest options that seem suitable you should get cost illustrations from the lenders (as opposed to multiple quotes) and then go on to get a formal quote and apply for the cheapest loan for your circumstances.
