Obtaining a Personal Loan

Getting a loan is easier than you might think, depending on what you go with for your option. The credit crunch has restricted some avenues, but it is also a great time to get your finances straight. You can consolidate credit card debt and clear any overdraft issues you might have had in the past. The answer is a personal loan. A personal loan can help you get a hold of some extra money. By obtaining a personal loan you are saving yourself the overdraft fees or other issues. You are also able to watch where the money is going and how you are paying off the debts you owe. Personal loans have been affected by the credit crisis, but that doesn’t mean there isn’t some help.

Since 2008 started lenders have increased their rates on loans. Black Horse for example has increased their smaller loans, such as 1500 pounds by 11 percentage points. This means you are now paying about 52.70 pounds extra in a year for this small loan.

The larger loans of 25,000 pounds and up have increased by 1.5 percent. This is a small amount, but that means about 1000 pounds more annually for the repayment. Nationwide has announced they are increasing their percentage points, which means a borrower will see 15.9 percent on a loan of 5,000 pounds.

Mortgage rates are not the only thing that has been increasing. The personal loans as we mentioned before are on the rise. In the past two weeks several banks like Barclay, Lombard, and Tesco have increased their rates. Barclay has also removed their one time best buy product offer. This means the master loan brand is no longer on the market.

There are still loans on the market and with credit card debt increasing as it is, it may be vital for you to find a loan that can help you at the lowest interest rate being offered. If you borrow up to 25,000 pounds or more on a personal loan you will have a fixed period of interest that will last for one to ten years. This loan is not secured against your home. In other words your assets will be safe if you have to default. The lowest interest rate will depend on the amount you are borrowing and for the duration of time you are doing to borrowing.

The more you borrow the less the rate will be. Your monthly payments will be smaller if you increase the amount of time you take out the loan. You can actually reduce the payments if you increase from 5 to 10 years on a loan by almost a third or more. You will pay a little more in interest if you hold the loan for that length of time, which is why they reduce the interest rate for a more favourable one. You should not assume that you are getting the typical rate though. Shopping around can help you get the best rate that is out there for your circumstances.

A lender is going to advertise a rate, but there is a qualification scheme that you must be found in. If you have a few issues in the debt department you won’t get the best interest rate. They will look at your history as well as your income to decide what the rate will be. Most of the consumers are offered a typical rate, but double checking is very important.

Borrowing more than you need, can also lower your repayment costs, but there is a worse side to this. You could end up paying more for the loan than you want. At the moment there are loans in which you borrow 5,000 pounds at a monthly repayment of 550 pounds. If you had a loan for just fifty dollars less you could end up paying about five hundred more over the life of the loan.

The reason for this is because a 5,000 pound loan is at 7.9 percent where as fifty pounds lower could be at 12.5 percent. The interest rate will be the most important aspect of getting a personal loan. Some lenders have increased their rates. However, this is not all bad news. Others are staying away from the trend because they realize the potential that is there. Britannia, Yorkshire, Clydesdale and others have actually reduced their rates for 2008.

So how do you get the best deal on a personal loan?

Shopping around can be the best thing you can do. This gives you the chance to see what is going on. By checking the typical rates you can find out if they apply to you and what the lenders are offering. You might find that the smaller the loan the higher the rate.

You shouldn’t assume that you will get the best rate. You need to make sure on the closing paperwork the interest rate you discussed is present. You may find it is a higher rate because things have been changed without your knowledge.

You shouldn’t apply to more than one loan at a time. In fact the more you apply the more marks will be against you. Research and determine the most likely loan that you can get. You don’t want a rejection slip on your report either, so choose wisely.

Be careful about the payment protection insurance. It can end up making you pay more for the loan. You may not even need it. It is a peace of mind issue, but it can get to be thousands more on a loan than you are willing to pay.

Many have hit problems with loans because they didn’t follow the above advice. As long as you are smart, and research the potential loans you can find a deal that will not cost you a great deal of money. Loans can help you pay back your debts in a timelier fashion if you choose correctly and make wise choices. You don’t have to be a financier to know what is right for your debts.

Back To Financial News May 2008

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