Low Cost Personal Loans
The shorter the repayment period, the less interest you pay
Low cost personal loans are advertised everywhere, but if you check the small print you'll soon discover that the rates aren't as attractive as they might be. In many cases the APR for loans of less than £5,000 are hefty – and you might find it cheaper to borrow on a credit card.
If you're looking for low cost personal loans, you need to do more than compare the headline rates: the lowest APRs are offered on bigger loans, and if you want to borrow £4,000 you'll pay a higher rate than someone borrowing £5,001. In most cases the highest rates are for loans of £1,000 to £3,000, and the lowest rates are for loans of more than £5,000. If you want to borrow less than £1,000, you might find it's cheaper to use a credit card instead.
Low cost personal loans are also affected by the repayment period. If you borrow £3,000 over 3 years, you'll pay around £800 in interest; borrow the same sum over five years and you'll pay around £1,300. If you're willing to take a risk, you can also reduce your payments by choosing not to take out payment protection insurance.
The other factor that's important with low cost personal loans is your credit rating. Although lenders publish a "typical APR", if you're not a typical customer then you probably won't be offered the typical rate. For example, Abbey.com has a typical APR of 6.6% for loans over £5,000, but the actual rates offered vary between 6.3% and 12.8%.
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