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HOW SHOULD ONE COMPARE LOANS?
There are clearly a number of factors to consider when applying for a loan including repayment period payment protection consideration, however the most crucial factor is the loan A.P.R.
WHAT IS A.P.R.?
The A.P.R. on a loan reflects the true cost of a loan to you. It takes into account the loan interest rate and any additional charges making it easier to compare loans when borrowing.
CAN ONE PAY THE LOAN OFF EARLY?
Prior to taking out the loan you should arrange with your lender for the terms
and conditions of an early settlement. If this is requested post commencement
of the loan redemption an 'early settlement statement' should be requested.
This will show how much you have to pay to redeem the loan. You will
not (unless the loan only has a few months to go) be required to pay
all the loan interest due over the remaining term. The method for
calculating the loan settlement figure varies however of loans up
to £25,000 the maximum you will repay is calculated using "the rule
of 78" (this is a complex calculation governed by the consumer credit
act 1974).
WHAT IS A SECURED LOAN?
In simple terms a secured loan gives security to the lender on the loan other than a simple promise to repay the loan. This would normally be a first or second mortgage on the borrowers home.
WHAT IF I ALREADY HAVE A MORTGAGE OR LOAN SECURED ON MY HOME?
It is possible (indeed common) to have more than one mortgage or loan on your property, most lenders will grant a further mortgage or loan if there is sufficient free equity in the property to secure the loan.
IS THERE ANY BENEFIT BY HAVING A SECURED LOAN COMPARED TO AN UNSECURED LOAN?
This depends on the terms of the loan, however in general, many lenders will only grant a loan when security for the loan is provided (in other words it can be easier to obtain a loan with security-particularly in cases of adverse credit) secured loans generally offer more flexibility in loan repayment terms, but most importantly the interest rate on secured loans is generally much lower than unsecured loans.
WHAT IF MY LOAN APPLICATION IS NOT ACCEPTED?
Sometimes a lender may not wish to give you a loan, this may be for a number of reasons, however the lender does not have to tell you exactly why you the loan been refused! you can however ask for the name and address of any credit reference agency used for assessing the loan.
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