Low cost loans come in many forms and you need to think about more than just the Annual Percentage Rate (APR) charged.
The key to finding a low cost loan is shopping around and knowing the market. Read on for our independent guide to finding cheap loans.
Low interest 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 that lasts, you can make sure your interest payments remain low by choosing a loan with a fixed rate. Since a rock bottom APR could change at any time, you can protect your payments against the changing financial climate.
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. This is because the lender will want to protect itself from losing the money it would have gained in interest over the longer period.
If you want to be able to pay off your loan early then check which loans apply a charge and which don’t. Not all of the best loans have an early repayment loan so it pays to shop around properly.
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 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.
Our 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 to get started.
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