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Cheap Loans Definition
What we mean by the popular phrase "cheap loan" is simply a loan with the least cost associated with borrowing an amount of money. The immediate cost that springs to mind is interest rates and people looking for a cheap loan are usually looking for a loan with the lowest interest rate possible. However, the full cost of a loan is also dependant upon fees, charges and especially on the loan period or time taken to repay the loan.
Types of Cheap Loan
Cheap loans fall into two categories: secured and unsecured loans. A secured loan should be cheaper than an unsecured loan because securing the loan against your property or other item of value reduces the risk to the lender. Whilst a loan secured against a car might be acceptable for a car loan, you might want to think long and hard about securing a loan with your home.
Cheaper than Cheap
The best way of reducing the cost of a loan is to pay it off faster. A great way to educate yourself about the cost of a loan is to play with a loan calculator. Look at what happens to the total amount repayable when you vary the interest rate. Do the same exercise again but this time change the period of the loan. Of course you need to watch the monthly repayments and ensure you have set a realistic budget that will ensure you can meet all the repayments.
How to get a Cheap Loan
The best port of call is the loan comparison web sites. You will find quite a few listed at the bottom of this page. We recommend you visit a few loan comparison sites as they do not all list the same lenders. Once you have entered your requirements and have been presented with a list of banks and finance companies don’t just jump on the one with the cheapest interest rate. This is the time to do some extra work by examining the terms and conditions of each cheap loan deal. You will also want to compare the charges for defaulting on payments and any admin/set up fees. These admin/set up fees should be included in the APR but you may want to be aware of any larger repayments at the start of the loan.
Beware the cost of Payment Protection Insurance
Payment Protection Insurance (also known as PPI) adds to the cost of the loan so should be considered carefully. Read more about Payment Protection Insurance.
Are you Eligible for a Cheap Loan?
The cheapest loans are usually offered to those people who are considered as having the least risk of defaulting on payments. If you have a poor credit history you will struggle to get the best deal and should therefore consider whether you can spend some time focusing on repairing your bad credit history.
Compare Cheap Loans
A good place to start comparing loan rates is are the loan comparison sites listed at the bottom of this page.