Life is never simple and there are any number of reasons why people need to borrow money. Some people might take out loans for unexpected household repairs. Others perhaps just need a new car or want to go on holiday.
Even the best-laid plans can sometimes not be enough to cover an unexpected expense. Even if you have savings, it can be a good idea to take out a loan as opposed to wiping out your hard-earned nest egg. Interest rates are currently low, which is bad news if you are looking for a good return on your savings, but not so bad if you are looking for a good deal on a loan.
There are different kinds of loans available that vary according to how much you want to borrow and for how long a period. You should shop around for the best interest rates to make sure you get the best deal possible. Other factors, such as your credit history, will also dictate the type of loan and terms and conditions that are available to you.
If you already have a loan, but suspect that you are paying more than you need to, there is nothing stopping you from changing lender, although there may be penalty fees for settling your existing loan early. Don’t assume that your bank will always give you the best rate. Check online using a comparison website that will show you a selection of like-for-like quotes.
By providing a comparison website with a few details of your requirements and circumstances, you will be able to see a list of lenders who will provide you with the amount you need along with details of the interest rate, the monthly repayments and the total real cost of the loan. If you see a loan with lower monthly payments or perhaps want to change the term of your loan (make lower payments over a slightly longer period) then this will be easy to arrange.
Short-Term Loans
If you have simply overspent or have an unexpected but relatively low expense, then you could consider a short-term loan. You could initially discuss arranging an overdraft with your bank but before going ahead, check this against the costs of other forms of finance.
Interest rates on short-term loans tend to be higher than on larger long-term arrangements so be realistic when deciding how long you need to repay the loan.
Long-Term Loans
These are generally for larger amounts over a longer term and it really pays to shop around for these types of loan. Use a comparison website to see the terms offered by a broad selection of lenders.
It is often more revealing to look at the total amount payable rather than the interest rate to get an idea as to how much the loan will cost in real terms.
However, do not be tempted to overstretch yourself with the monthly repayments just to pay a lower credit fee. It is better to pay a little more in credit fees in the long term than to get yourself into financial difficulty trying to pay off loan on terms that you might struggle to meet.