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The Loan Ranger – fighting for a fair price

If you’ve had your eye on a new car or were looking to make home improvements for the summer then increased mortgage repayments could put a halt your plans.

So if you’re one of those people looking at personal loans and thinking "that could suit me nicely", MoneyExpert’s Loan Ranger is here to make sure you get a fair deal and avoid the bad guys.

How it works

Personal, or "unsecured" loans offer you the chance to borrow money without fear of having to put your home at risk if you don’t meet the repayments. They promise flexibility – you can borrow anything from £500 to £25,000 and can choose whether you’d prefer to pay it back in six months, six years or even 10 years.

If you’re not sure how much you want to borrow, use a loan calculator to work out what your repayments will be – and remember, borrow what you can afford to pay back each month, and not a penny more.

Finding the best rate

The Loan Ranger says: "Not everybody qualifies for the rate advertised. If you have a poor credit record – maybe you’ve missed a few credit card payments – then you may well be charged a higher rate than the one they advertise."

The rates on personal loans are fixed. This means you know exactly what you have to pay each month over the term of the loan.

Interest rates on loans can vary dramatically, so the key is getting a loan with a low APR. This may sound obvious but few of us actually take the time to work out how a couple of percent difference will affect our monthly repayments.

9% and below

There are a quite a few lenders out there offering APRs of 9-10 per cent or more. Above nine per cent is a bad deal for a headline rate. Anything around 6.5 per cent is a good rate at the moment – there are plenty around for under 7 per cent.

Don’t waste time chasing loans you won’t get

The Loan Ranger says: "If you have a bad credit history, then your chances of securing a loan at a low rate will be reduced. By clicking on the credit profiling tool on, you can find the lenders most likely to offer you a loan and will have a good idea of what is on offer to you."

Applying blind can mean you get rejected and then offered a much higher rate. Getting rejected by too many lenders will reduce your chances of being offered a loan elsewhere as they go on your credit record. Lenders look at a lot of rejections and think you’re a bad risk or are desperate.

Go for the short term

You want to be repaying your debt for as short a time as possible as that means paying less interest. But you need to ensure the monthly payments are affordable.

Additional fees

You should not have to pay any set-up fees for a personal loan, but many lenders charge a fee for paying off the debt early – it’s called an early redemption penalty. Many people do like to do this, so check whether your loan imposes a penalty.

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