Which Personal Loan

Never a lender nor borrower be but sometimes it's hard to be 'a loan'. You can borrow our advance guide to a personal loan in one easy instalment!

Credit where credit's due - will you be secure with your finance package?

A personal loan is usually only allocated to people who can demonstrate a good credit record and that the item being purchased is worth the sum being borrowed. A personal loan may be either secured (ie a default on repayments could result in the borrower's property being seized) or unsecured (ie a loan just made against the value of the item itself). For obvious reasons of risk, the secured loans have a lower premium than unsecured ones.

The first step in choosing which personal loan is to assess yourself. If you can't pass that muster, then you are likely to be refused by the various lenders and each refusal will have a negative effect on your future creditworthiness. Therefore, aim to avoid being refused. Go through your finances and be realistic about what you can afford to pay back each month. Don't forget to allow a sum for contingencies - ie when something unforeseeable goes wrong and you have to delve into your savings to put it right. You must be realistic with your assessment.

Before even considering applying for a loan, try to get as much information as possible on what is available. Investigate as many companies as you can (the Internet is ideal for this kind of research), all the time looking to see what you can get for the maximum repayment you can afford. Note down the following for each lender (based on your maximum repayment):

Minimum repayment period that you can afford
If you are required to put down a deposit
How long (if at all) the loan repayments are fixed for
Total repayment figure
APR (Annual Percentage Rate of Interest)
Set up and administration costs
Settlement fee
Early repayment costs
Security required
Whether a particular bank account is needed (with associated set up costs)
If the loan can be extended in period should you run into difficulties
Whether you will need references from your employer
Any free gifts or special offers

Some of this information will not be readily available. Banks are notorious for not listing all of their charges and it is essential that you don't sign anything until you know exactly what you are being asked to pay.

Run the repayments through a spreadsheet if you can and see if the lender is giving you credit for your repayments monthly or annually. The latter is a favourite scam - ie they take a year's worth of repayments from you and then calculate the interest as if you had not paid a penny! Don't be afraid to bring this up and renegotiate the terms.

Finally, you are going to get a number of offers - play one off against the other to make sure that you get the absolute best loan deal possible.

We hope that this has helped you to choose the right personal loan.