Loan information

About Loans

The following information is provided to help you choose a loan wisely. The key pieces of information you will need to consider are all explained and brought together in a way that will help you find a loan that you can confidently afford to repay.

Loan Information Glossary

  • Interest Rate - The rate at which interest is charged on a loan

  • APR - Annual Percentage Rate. The cost of the loan on a early basis

  • Term - The time planned to repay the loan. The shorter the term means that less interest will be charged but monthly payments will be higher, the longer the term the more interest will be charged but the monthly payments will be lower.

  • Loan Type - Secured such as mortgages or a mortgage further advance, PCP's (personal contract plan) and HP (hire purchase), unsecured, personal, student and payday loans. It is essential to choose the loan which is best suited to your needs and for you to fully understand the terms and conditions of the loan.

  • Additional Charges - The APR is not the only thing to take into account when looking at the cost of a loan. Additional charges such as set up fees, settlement fees, late payment charges and administration fees should also be considered.

What information do you need to ensure you can repay a loan?

You need to make sure you know how much more you can afford to pay for your loan on a monthly basis. To do this you will need:

  • Your surplus income. You should have a budget to plan your income and outgoings to ensure that your day to day living will sit comfortably with your loan repayments. Your budget should include putting money aside for annual costs such as insurance and unexpected costs such as repairs.

  • You also need to know the actual monthly repayments including initial charges.

  • Loan Payment Protection costs (see below).

If your surplus income is more than the loan repayments (and any loan payment protection payments) they you can afford the loan.

Loan Payment Protection

* Payment Protection - Look at what may happen if you were unable to work due to, for example, sickness or redundancy. Would you still be able to manage the payments? If the answer is no, then it might be wise to consider a payment protection plan but read the terms and conditions very carefully as they may not actually provide you with the cover you need.

* Life Insurance - Dependent on the loan size, consider the implications if you were to be killed during an accident or from sickness. Who would be left with your outstanding debt and how would they manage this? It may be wise to take out a life insurance policy to ensure that is the worst was to happen your next of kin would be able to clear any outstanding loans.

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Updated on 7th January, 2010

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