If you see an advertisement for a cheap loan which seems too good to be true, it may well be. Here are some top tips for spotting the potential pitfalls of loan offers and finding the right cheap loan for you.
DO: Compare loans
Lenders often categorize their loan offers as excellent deals, when in fact you could do a lot better if you took the time to compare loans across a range of different providers before choosing one, supposedly ‘cheap’, loan.
DON’T: Mistake ‘typical APR’ for a fixed rate or average rate
APR is an acronym for ‘annual percentage rate’, meaning the interest rate for the whole year. It’s easy to make the mistake of assuming the ‘typical APR’ is the precise interest rate you will pay on your cheap loan. In fact, this term refers to the interest rate offered to at least 66 per cent of applicants for that particular loan. Due to your own personal circumstances and credit history, you may be offered a higher rate than the ‘typical APR’, or you might not be able to take out the loan you want at all.
DON’T: Ignore the other charges
While the ‘typical APR’ is a good place to start when searching for cheap loans, there are often other charges involved when taking out a loan, and you also need to consider payment protection insurance. Take all of these things into account when you compare loans and you will get a much clearer picture of what the different lenders are offering.
DO: Check your credit card report
Take a look at your credit card report before embarking on a cheap loan agreement. Your credit card report will reveal how you will look to lenders when applying for a loan. You will also benefit by seeing if there are any errors and correcting them before you make an application. This will give you the best possible chance of being approved for a cheap loan.
DON’T: Be taken in by ‘payment holidays’
Sometimes, lenders will offer a ‘payment holiday’ which allows you to start paying off the loan later, perhaps after three months, instead of having to start making payments straight away. Unless this is really necessary, it tends to be better to turn down this of
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