Things to Watch Out for When Getting a Loan

Taking out a financial product of any kind is always tricky if you’re doing it for the first time and you don’t have all the facts at your fingertips.

Deciding to get a personal loan is an example of a really big financial decision, and one that can throw up a host of problems if you don’t know what to look out for and what to avoid.

To ensure you get the best possible personal loan and don’t run into any problems later on, here are a few important things to think about before applying for a loan.

• Bear in mind that your first application for a personal loan may not be accepted. In fact, you may never be approved for a personal loan if your credit history and credit rating aren’t up to scratch.

• You should know that you may not get the interest rate that is advertised by the loan provider. You can spot this by looking for the APR, which stands for annual percentage rate. Not everyone qualifies for this rate and it often depends on your credit score. What’s more, providers are only obliged to offer this rate to around half of the borrowers they lend money to.

• You should always check for arrangement fees, which can make loans more costly.

• Avoid bank loans with variable interest rates (which can rise or fall) if you can only afford the initial repayments.

• You don’t necessarily need to sign up for payment protection insurance (PPI) at the same time that you get your loan. If you need this insurance, you may be able to get it cheaper elsewhere.