Personal loan guide

Personal loan small print
With so much competition in the marketplace, personal loan interest rates are falling. So to make loans profitable, providers often add hidden charges to a loan that may catch out those who did not read the small print. Read on to learn more about those hidden costs.
What is ‘Typical APR’, and how can it be tricky?
Typical APR is the headline interest rate figure lenders quote when advertising a personal loan. It’s tricky because although a lender may quote an Annual Percentage Rate (APR), which is the amount the loan will end up costing you including interest and charges, you may end actually paying more or less than that rate.
This is because many lenders calculate the typical APR of a personal loan in conjunction with a system called risk based pricing. This means that they assess each individual's circumstances and credit history before deciding what interest rate to offer the individual. Although a lender has to offer the typical rate to 66% of people that successfully apply, it is possible that you won't get this rate.
Personal loans and early repayment charges?
Repaying your personal loan early could cost you, rather than save you money. An early repayment penalty can be the equivalent to one or two month’s interest. The earlier in the term you repay your personal loan, the higher the charge.
But some providers have scrapped this charge, so it pays to shop around.
Ourloans comparison service shows which personal loans have an early penalty fee attached.
What is ‘PPI’ and do I need it?
While you may worry about paying a personal loan back should you lose your job or become ill, taking out Payment Protection Insurance (PPI) could be an expensive option. There are also many caveats with these policies and some people find they are not covered. Policies that only pay out if you are made redundant offer the self employed no cover.
Another issue is that many lenders add the full cost of the insurance to the personal loan at the outset, so customers have to pay interest on the cover as well the sum they borrow.
PPI is available via other independent organisations that charge vastly reduced premiums for the same cover, so this may be worth investigating should you feel that cover may benefit you.
A personal loan to suit you
So now you know all about what’s in the loan small print, you should be ready to choose your own personal loan. It couldn’t simpler, safer or easier. Just go now to our personal loans calculator.