A Guide Personal Loans and Interest Rates

By: Graeme Dick

Introduction

There are many different loan companies offering their loans, however some loans are better value than others. For example the amount you borrow compared to the total about you end up paying back can vary greatly depending on the APR (annual percentage rate) of the loan.

APR

The lower the APR, then the better value for money the loan will be. APR Rates typically vary from around 6% to 30% however some are even higher. This percentage is charged as an annual percentage of the loan amount for each year you are repaying the loan. This percentage is included as part of your 12 monthly payments each year.

Reducing APR

Apart from shopping around for a loan to get the best APR available, if you can afford it, you could reduce the repayment period which would reduce the amount of interest that is paid on the loan. Sometimes the rate also reduces the more you borrow, so it can be worth reading the small print to see what values reduce the APR, as it may be worth borrowing slightly more than you need in order to get a lower rate. Some companies have online repayment calculators which will let you see the difference in borrowing slightly more to reduce the APR.

Credit History

Sometimes you may be refused credit from some of the low APR loan companies as they rely on you having a good credit scoring. Even if you have never been late with a payment for anything before, you still may be refused as you need to have a proven credit history in order to gain a good credit rating. Without a credit history you are seen as a higher risk and may be offered a loan at a slightly higher APR than advertised. Providing this is not too high, it may be the best offer available and providing you make all your payments OK hen chances are you will have no problem being offered the top rates the next time you apply for a loan.

Conclusion

Most large companies are quite up front about their loans in recent times, however before taking out the loan be sure to check the small print and make sure you are aware of any additional charges that may be involved such as if you plan to pay the loan off early, or if you make a late payment.

Personal Loans
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