With so much competition in the marketplace personal loan interest rates can be competitive, but are they suitable for you?
Personal loans are often the cheapest way to borrow amounts over £1,000. We look into what you need to be aware of before taking out a loan.
To make loans profitable, providers often add hidden charges to a loan that may catch out those who did not read the small print. Read on to learn more about those hidden costs.
What is Representative APR? How can it be tricky?
Representative APR is the headline interest rate figure lenders quote when advertising a personal loan.
It’s tricky because although a lender may quote an Annual Percentage Rate (APR), which is the amount the loan will end up costing you including interest and charges, you may end actually paying more or less than that rate.
This is because many lenders calculate the representative APR of a personal loan in conjunction with a system called risk based pricing. This means that they assess each individual’s circumstances and credit history before deciding what interest rate to offer the individual.
Although a lender has to offer the representative rate to 50% of people that successfully apply, it is possible that you won’t get this rate.
Personal loans and early repayment charges
Repaying your personal loan early could cost you, rather than save you money. An early repayment penalty can be the equivalent to one or two month’s interest. The earlier in the term you repay your personal loan, the higher the charge.
But some providers have scrapped this charge, so it pays to shop around.
Our loans comparison service shows which personal loans have an early penalty fee attached.
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