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    5 Tips for Taking Out a Personal Loan

    Making the decision to take out a personal loan requires a lot of consideration. The world of lending can seem like a minefield with so many options and so much differing information and advice available. Below are some handy hints and information to keep in mind when considering taking out a personal loan.



    1. Decide on the type of loan you need
    Firstly, the prospective applicant should check his or her credit rating to find out what types of loans they can apply for and what lending rates they are likely to receive. This is a fairly simple process, and can be done online. Applicants may choose to apply for a secured loan – for large sums – with a variable interest rate; this type of loan is usually taken out against a house. Alternatively, unsecured loans that are not secured by an asset are also available; here, the interest rate will generally be higher than that which one would receive with a secured loan, but in most cases the rate is fixed so the repayments will stay the same across the term of the loan. Depending on the company, loan amount, and type of loan, the applicant will need to complete paperwork and submit information such as income details.

    2. Where loans are available from
    Most banks offer personal loans of some kind, and some are only available to existing customers; however, it is usually possible to transfer a current account over to the bank offering the best deal. Many supermarkets offer loans with an online application process. Private online lending companies require the fewest personal details, but will generally charge higher rates than a bank.

    3. How to find the best deal
    It is a good idea to shop around, both by using comparison websites and by speaking to bank managers about lending rates, as they can differ significantly. Prospective borrowers should also be aware of the ‘TAR’ – Total Amount Repayable – which will include principle and interest as well as any additional charges. Understanding all the details is crucial; some deals may look good but include a compulsory payment holiday, which means there must be a break from payments during which the remaining amount accrues additional interest. Some lenders, including Unsecured Loans will offer better rates if applicants can provide a guarantor.

    4. Failing to make repayments
    Usually, in the first instance, lenders will be willing to work out a new agreement if repayments are not being met. Once again, it is crucial to be sure of all the facts, fees, and costs to avoid even worse debt difficulties. Depending on the type of loan agreement, if repayments cannot be made the lender may ultimately move to repossess assets belonging to the debtor in order to recover the outstanding amount. This can sometimes be the case even with an unsecured loan.

    5. The better the credit score, the lower the interest rate
    A bad credit score can make getting a loan difficult, and applicants will almost certainly incur higher rates of interest. Applicants should assess their situation including exactly what they need in terms of a loan, as well as what will be a realistic repayment timeframe for the loan. It is crucial to gather comprehensive information on lenders, rates, and policies before deciding on any loan, finding a guarantor to secure a loan may well help to bring rates down significantly. The bottom line is the higher a persons credit rating, the better rate they will receive from lenders. Those considering taking out a personal loan should think about ways of improving their credit rating before acting; even simply paying bills on time regularly will help.

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