Expert gives tips on cheap loans
With Nationwide announcing a new personal loan at a market-leading rate of 7.7 per cent, one expert has given some tips on finding a suitable deal.
The low base rate had yet to make any impact on the personal loans market until Nationwide announced its 7.7 per cent offering last week, but for those wanting to look elsewhere, one expert has offered some advice.Writing in the Independent, financial journalist Victoria Bischoff said that cheap loans may now come onto the market thanks to the Nationwide deal, but borrowers should still shop around to see if they can get a more suitable offer elsewhere.
What may seem like a cheap loan may in actually end up costing more because the headline rate doesn't reflect everything about the product, according to the writer, so borrowers should also check the details of each deal before signing up.
One of these small details is an early repayment charge - a fee payable for settling debt on a secured or unsecured loan before it is due in order to bring down the cost of interest - and Ms Bischoff advises that this can make a big difference to the eventual price.
She claims: "If you plan to apply for a market-leading personal loan, it's crucial that you check your credit rating first.
Lenders are only required to offer their advertised 'typical' APRs to two-thirds of applicants. Therefore, if your credit rating is not in good shape, you may be offered a more expensive deal than the low rate loan you originally applied for."
Cheap loan provider the Royal Bank of Scotland was recently accused of allowing customers taking out the products to amount huge sums of debt.
One customer with the company took out a loan of £16,000, which due to health problems suffered by the borrower was allowed to spiral out of control into a £153,000 debt, according to the Guardian.
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