TAKING out a loan could be a good way of spreading the cost of a big purchase – we round-up the best rates currently available.
Before you consider borrowing money, there are a few things to be aware of first.
Taking out a loan is a serious financial commitment, so you'll want to make sure you can afford to meet all the monthly repayments.
You can do this by taking into account the length of your loan, plus the interest rate, to make sure it's affordable for you.
You'll also want to make sure you don't damage your credit score by checking how likely you are to be accepted by using a "soft search", such as this one from MoneySavingExpert.
Although a "soft search" is still recorded on your credit file, lenders can't see it so it won't affect any future credit applications you make.
Loan shopping: what you need to be aware of
AS with credit card applications, when you apply for a loan a search will be left on your credit history – even if you’re unsuccessful.
But you can check your eligibility with tools, such as ones from MoneySavingExpert or TotallyMoney, which will show you what loans you are most likely to be accepted for.
According to money expert Andrew Hagger, smaller loans tend to come with higher APRs than if you were borrowing a larger sum – so in some cases it might be worth you putting your spending on a 0 per cent or low-rate purchase credit card instead.
Before applying, make sure you work out what you can afford to pay realistically each month – and borrow as little as possible over the shortest length of the loan.
Only those with the best credit histories will get the headline rate – and only 51 per cent of successful applicants need to be offered the rate for providers to advertise it – so you will likely be offered a worse deal if your credit history is a little patchy.
Make sure you know what the penalty will be if you repay your loan fully before the term is up – it's ususally between one and two months' interest.
Remember, the deal you'll get will depend not just on your credit history but the loan provider's criteria.
All loan rates are also "representative" which means that only 51 per per cent of successful applicants have to get the rate – so you could successfully apply but get a more expensive deal.
Remember that the longer you take the loan out for the lower your monthly payments, but the interest you'll pay will soon add-up.
So work out how much you can afford to pay in the smallest amount of time.
Cheapest loans for £3,000
The deals below are calculated on a repayment term of three years (36 months).
If you increase the length of your term, you'll lower your monthly repayments but pay more interest overall.
- Metro Bank APR 7.9% – Apply here
Monthly repayment: £93.87
Total amount payable: £3,379.32
Interest payable: £379.32
- Hitachi Personal Finance APR 8.4% – Apply here
Monthly repayment: £94.13
Total amount payable: £3,388.68
Interest payable: £388.68
- Tesco Bank APR 8.5% – Apply here
Monthly repayment: £94.26
Total amount payable:£3,393.36
Cheapest loans for £5,000
These rates are also based on a repayment term of three years (36 months).
- Tesco Bank APR 3.4% – Apply here
Monthly repayment: £146.17
Total amount payable:£5,262.12
- Hitachi Personal Finance APR 3.5% – Apply here
Monthly repayment: £146.39
Total amount payable: £5,270.04
Interest payable: £270.04
- John Lewis Financial Services APR 3.6% – Apply here
Monthly repayment: £146.54
Total amount payable: £5,275.55
Interest payable: £275.55
How to cut the cost of your debt
BEING in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money.
Work out your budget – by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs.
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate).
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
Get a payment holiday – The majority of major credit card companies are offering three-month payment holidays if you're struggling to meet your repayments. You should always keep paying until you've come to an agreement with your provider. Most lenders will also still charge interest during this time, so be aware that these costs will keep building up.
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
Cheapest loans for £7,500
These calculations are based over five years (60 months).
- TSB APR 2.8% – Apply here
Monthly repayment: £134.13
Total amount payable: £8,047.80
Interest payable: £547.80
- M&S Bank APR 2.9% – Apply here
Monthly repayment: £134.31
Total amount payable: £8,058.60
Interest payable: £558.60
- Santander APR 3.0% – Apply here
Monthly repayment: £134.63
Total amount payable: £8,077.80
Interest payable: £577.80
Cheapest loans for £10,000
These rates are calculated on a repayment period of five years (60 months).
- Cahoot APR 2.8% – Apply here
Monthly repayments: £178.64
Total amount payable: £10,718.40
Interest payable: £718.40
- Sainsbury's Bank APR 2.9% – Apply here
Monthly repayments: £179.07
Total amount payable: £10,744.20
Interest payable: £744.20
- John Lewis Finance APR 2.9% – Apply here
Monthly repayments: £179.07
Total amount payable: £10,740.38
Interest payable: £740.38
The Sun has rounded up eight ways to help you get out of debt.
One in five Brits have no idea how much debt they’re in – here's how you can free help with your finances.
Plus, here are the best websites to look for a new job – and how to make sure you get a pay rise.
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