What does a low cost loan mean?
Low cost loans come in many forms. When you think of a low cost loan, you might only consider the Annual Percentage Rate charged, but you should also be aware of the other ways in which lenders can benefit from their customers. The key to finding a low cost loan is shopping around and knowing the market.
Read on for uSwitch’s independent guide to finding a low cost loan.
Interest rates and low cost loans
The most obvious way to choose a low cost loan is by looking at the APR, or Annual Percentage Rate. On the whole, choosing a low APR is the easiest way to save money on your repayments. But how do you know you’re making the right choice? New loans are introduced all the time and lenders are always changing their rates, so the only way to tell which low cost loan is the cheapest is to compare them all.
Fixed and variable rates
If you’re looking for a low cost loan, you should ensure that your interest payments remain low by choosing a loan with a fixed rate. Since a rock bottom APR could change at any time, you will insure your payments against the changing financial climate this way.
Loan arrangement fees
Some lenders charge a loan arrangement fee when you take out your loan, in much the same way that a credit card provider can charge an annual fee for owning the card. While this fee can bring down your interest rate, it will add to the overall cost, so it may be more sensible to take out a loan with a low rate and no fee.
Early repayment fees
Some lenders charge you the equivalent of two months’ interest if you choose to repay your loan early. Early repayment of your low cost loan can seriously reduce the money you spend on it, so try to pick a loan that is easy to pay back if you find you can afford it.
Choosing a low cost loan
The best low cost loan is one that has a low, fixed APR, no arrangement fee and no early repayment fee. You might think that this perfect loan is hard to find, but there are plenty out there if you know where to look. Be careful if your credit rating has been damaged though: your application for a low cost loan will probably be rejected and your credit score will suffer. You can see your credit report online with a free trial of Credit Expert* or for more information, read our background guide to credit reports.
If your credit rating is good, you can take your pick from the low cost loans available. The uSwitch.com loans comparison service will search through all of these loans for you, giving you a set of results consisting of the best low cost loans for you. Just answer a few questions about the type of loan you’re after, and it will do the rest.
Low cost loans at your fingertips
Our loan comparison service is completely free to use and totally impartial. As if that wasn’t enough, it will only take a couple of minutes of your time. And once you’ve decided on a loan, you can even apply for it online.