Category: Personal Loans

Is Interest Rate the Most Important Thing When Picking a Personal Loan?

When we are choosing between loans, we are often led to believe that the interest rate is the most important factor. We might see comparison websites where it is the interest rate that is compared or adverts stating that a lender has low interest which may make us think that it is the best thing to compare. There are other things that we need to be aware of though, as well as the interest rate, when we are choosing a personal loan.

Additional costs
As well as the interest that we pay on a loan, there will be other costs as well. These often include set-up fees or other administration charges. Sometime these are added in to the interest but they might be charged separately. It is good to look into this before you take on a loan. The APR rate will include the costs so this could be a better way to quickly compare loans. However, some of the costs will only have to be paid in some circumstances. For example, if you want to repay the loan early, you might have to pay an early redemption charge or if you miss a repayment there may b a fee associated with this. It is therefore worth finding out what these are and how competitive they are as well as the headline interest rate. You may find that the interest rates are similar but these fees could be quite different and so they could be an important factor when you are making your decision.

You may hope to have a lender that will be flexible. Perhaps you hope that you will be able to make some overpayments on your loan if you can afford it and then pay the loan off early or repay less when you have less money available. You may hope that if you miss a repayment that you will not be too harshly dealt with or you might be able to delay a payment for a while. You may hope that if you income suddenly decreases that they might be able to change the repayments so they are lower but spread them over a longer time period. If you want something flexible then you will have to make sure that your lender is happy with that. Lenders differ massively and so you will not necessarily be able to tell without contacting them directly. Even if they advertise the product as flexible, you will want to find out exactly what they mean by that so that you are sure that it is what you are expecting.

Lenders differ a lot in how they treat their customers. It is good to find out a bit about them and use a lender that you feel you will be able to trust. This does not necessarily have to be one that you have used before but perhaps one that has been recommended to you or that you have read new reviews of. Take some time to do a bit of investigation so that you have an idea of what you are getting into and what your lender might be like. Look at their website to find out more about them and ask others what they think of them as well. You could also look online and see if you can find any reviews or other information about then which might be helpful for you.  If you think you will need to contact them for anything, then you want to be confident that you will be dealt with well and that they will do everything that they can to help you. You could even contact them yourself to find out how they respond and how quickly. You could get in touch with their customer services and ask them a few questions and this will give you an idea as to how they might respond to you once you were a customer.

It is well worth spending a bit of time doing these investigations as you could end up with a cheaper and better service as a result. Although the interest rate is important, there are other factors to consider when you are comparing lenders and so make sure that you do not just go to the one with the lowest rate but that you check out the difference between a selection of them to be sure you get the one that will offer you the best value for money. It is easy to rush into this sort of decision when the best thing that you can do is to take your time and make an informed decision based on careful research. It will take a while but it will be worth it if it means that you save money or that you have a less stressful experience. Hopefully you will be able to achieve both by choosing carefully.