If you're struggling to get credit there's always a way. Here are five tips for wheeling and dealing your way to a decent loan.
The interest rates on personal loans vary enormously, depending on a number of factors. Here are five ways to get the best rate for you.
1. Be cunning
You need to keep your wits about you when you're looking for a loan. Don't rely on the APR, the annual percentage rate of interest, as this can be manipulated. Instead, look at the actual cost per month and the total amount repayable (the TAR). You also need to
2. Know how creditworthy you are
When you look at a deal, you'll see the APR, and next to that you'll probably see the harmless-looking word 'representative'. This means that the rate you're seeing must be offered to just over half (51%) of successful applicants and worse rates are offered to the remainder. This also means that they can cherry-pick borrowers.
Therefore, if you have a tarnished credit history, or if you don't fit the lender's profile, you could be turned down or offered a much worse rate. If you don't think you're a top-rated borrower, you could try a social lending site such as Zopa or RateSetter. These sites are middlemen that match borrowers with people willing to lend money. You may well get a better interest rate than you would from a big financial company, depending on your credit rating.
3. Look everywhere
While you're shopping for a loan, check everywhere. You can compare loans here on lovemoney (we tell you the TAR as well as the APR), scour the newspapers, ask what your bank or building society will offer you as an existing customer, look at credit unions, even ask your friends. But avoid secured loans if you can, as they put your home at risk if you don't keep up with the repayments.
4. Be clever with your quotes
If you call up loan providers, many will do an instant quote based on the details you give them about your finances. If you're turned down, at least it will happen without another search mark being added to your credit report, which can negatively affect your rating.
5. Avoid PPI
We're not too big on getting insurance to protect your loan, to put it mildly. Loan providers offer rip-off payment protection insurance (PPI), also called personal loan protection (PLP) but, for most people, it truly stinks. This is one of the reasons why banks are now paying out billions in compensation for mis-selling it.
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