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There is much more to comparing loan products than just getting the cheapest interest rate. Different loan products may have distinct T&C’s, which may make two seemingly similar looking products actually distinct in reality. To make sure you are comparing loans like-for-like, keep the these items in mind during your loan search,

Annual Percentage Rating
The Annual Percentage Rating, is your first point of reference when you are looking for a loan. You should try to find the cheapest APR that you will be accepted for, as this will keep your loan as cheap as possible. However, there are many factors that will influence the rate . These factors will change from lender to lender, which makes comparing different products from different brokers tough based on APR alone.

What interest rate is best for you?
An important part if comparing loans like-for-like is determining whether the interest rates is variable or fixed. APR on loans with variable interest rates could rise or fall over the loan term if the lender adjusts their rates. This will budget more difficult to predict. Then again, the interest rate on a fixed interest product should stay stable, which means you will always know what your repayments will be from month to month.

Monthly repayments vs total cost of the loan
The most important thing to check when comparing loans is the overall cost of the loan. That is the entire amount you will repay. It can be tempting to look at the monthly repayments as an indication of the affordability of a loan, but that is true only if the loan term and the interest rates are both equal. Loans like bad credit personal loans will have higher monthly repayments.

How long the loan lasts
The loan term is the duration of the loan, or the amount of time agreed between the broker and yourself during which you will pay back the loan in full. The longer the loan term, the more you will repay overall, which might make the loan more expensive.

Flexibility
Two common flexible features are payment holidays and the option to repay the loan early without charge. Some brokers like are Asda loans more flexible than others These can make a difference to the actual total cost of a loan. These features are usually listed in the terms and conditions, so make sure you check them when comparing your loan offers.

This article was written by Claire who works for Top 10 Mortgages

This entry was posted on Tuesday, May 12th, 2009 at 10:39 am and is filed under Loan Parlor. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.