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A personal loan is most useful to help you cover any upfront cost for just about anything. The flexibility in which borrowers are allowed to use the funds makes it one of the top loan choices among the borrowing public.
This is money you borrow from a lender, a bank or a credit union that you then pay back monthly with the interest rates through instalments. Most lenders will offer different borrowing ranges from £5,000 to £15,000 or even more. But what you’ll be approved for will depend on factors such as your credit history and rating, financial records, present income, and how much debt you currently have.
Things to consider when getting a personal loan
Before taking out a personal loan, determine first how much you need to borrow. Since personal loans are usually given in lump-sum, they’re better for one time, usually larger expenses. Minimum amount can vary per lender, but the smallest you can take out will often be £5,000.
See if you meet the requirements
It is always best to find out if you are qualified for a loan first before sending in your application. Applying randomly will only ruin your credit rating. You will need to meet employment and income requirements as well. Being unemployed can make it a little difficult for you to qualify for the loan. The same is true if you are self-employed since the lenders will need more proof to ascertain that you are earning enough to afford the loan repayments. Also, you need to have the necessary credit score. You’ll get the best APRs when your credit score is excellent.
Finding the cheapest personal loan
When looking for the cheapest personal loan, it is not enough that you choose a lender based on the representative APR they are offering. The law only requires lenders to offer this to 51% of their customers. This means that if your credit is bad, the actual APR charged for your loan may be higher.
Medium loans that range from £7,500-£15,000 often have the cheapest, most competitive rates. If you’re thinking of borrowing £10,000 payable within the next 3 years, the cheapest Representative APR in the market at present is 2.8%, offered by Cahoot Online, M&S bank, and Sainsbury’s Bank Nectar, followed by Clydesdale/Yorkshire Bank and Zoopa at 2.9% for the same borrowed amount.
What is the Cheapest Personal Loan?
If you are looking to get a personal loan, it’s natural to want to get the cheapest personal loan in the market. However, there are various factors influencing the cost of a loan, and one of the most important factors is your credit score.
Why does my credit score matter?
Lenders normally gauge the creditworthiness of a borrower through his or her credit score. A person with a good credit score is seen as someone who has handled finances responsibly in the past. The bad credit score of a borrower, on the other hand, is an indication of high risk. What lenders do to compensate themselves for taking on such risk is by imposing higher loan interest rates.
So in order to get a good loan deal, your credit history should be impeccable. Although this may still vary from lender to lender, this is usually the norm. Bad credit borrowers have to shoulder high rates and fees in order to obtain a loan.
Every lender has different tolerance when it comes to risk so it is important to inquire first or ask a quotation before taking out a loan. Online lenders can afford to offer lower interest rates than banks or mainstream lenders because they can save on operational and overhead costs that are present in bricks-and-mortar businesses.
In order to get the cheapest personal loan, you should work on improving your credit score. It is also important to understand how interest rates are computed by lenders so that you can get the cheapest personal loan for your situation.