What To Look For In A Personal Loan

Getting a personal loan for your next car purchase is a bit like buying clothes. You need to have a loan that is tailored to your individual circumstances. An ill fitting loan is as bad as a pair of trousers that don't fit, so make sure your next car loan fits you perfectly!

It might be easy to say 'make sure your next car loans that you perfectly ', but sometimes it is not that easy.

You need to know a little bit about how personal loans work before you can make your choice, so planning ahead can save you a lot of heartache as well as a lot of money.

Here are some things you may not know about personal loans that will help you to come to the right decision.

The interest rate charged on a personal loan varies from lender to lender. But the interest rate is also affected by whether the loan is secured or unsecured. A secured personal loan is one where the lender takes an interest in your car so that in the event of you're not being able to make repayments, they can sell the vehicle to get their money back. An unsecured loan is where the lender takes all the risk. That's why unsecured loans are more expensive than secured loans; they are simply a reflection of the risk taken by your chosen lender. Where possible, you should always seek a secured loan as this gives you the benefit of a lower rate and a lower monthly repayment.

Whilst most personal loans allow you to make extra repayments so you can pay the loan off sooner, there may be penalties for paying out the loan too soon. This is a question you should ask before you apply so that you are well aware of all the costs that may be involved. If you are planning to pay a loan off sooner, then you could be better off choosing a shorter loan term rather than facing an early repayment fee.

Personal loans always come with some sort of application fee. But many lenders are in the habit of charging an ongoing monthly fee. This monthly fee has a real effect on the effective rate of interest you are being charged, so it pays to ask the question about these fees before you start. Some lenders even charge settlement fees or documentation fees, all of which add to the overall cost of your loan. Make sure you ask the question before you sign up so you don't fall into that trap when it is too late.

It is natural for borrowers to approach their existing bank when it comes to car loans or personal loans for any purpose. Whilst it may be a good place to start, don't expect to get the best deal every time. Banks change their lending practices, and their interest rates regularly, so what you may have seen advertised last week may not necessarily apply now. Plan ahead when choosing your next car loan, and get all the information in advance before making a decision.