Cheap Loans

What is a cheap loan?

Cheap loans are by definition lower cost than other products for borrowing money. It is common sense that anyone looking to borrow money will want a cheap loan. The question is what is a cheap loan?

The best cheap loan for you is not necessarily the right choice for someone else. This is because it will be suited to your own personal requirements and circumstances. Another person’s situation and needs will be different and hence another cheap loan may be best for them. The best cheap loan for you will be the product which overall costs you less money to apply for and then pay back the capital and interest to the lender.

A cheap loan is the obvious choice for anyone borrowing money because it makes no sense to pay a higher level of interest than you need to. Unfortunately certain cheap loans may not be available to you because of your credit history or the amount of money you need to borrow. Despite having low headline interest rates, many cheap loans can also have additional or hidden charges which may make the product more expensive overall.

Is interest rate the key factor to a cheap loan?

A cheap loan should be the product with the lowest APR however it is not that simple. Just because a cheap loan has the lowest interest rate and appears highest in the best buy table does not mean it will be the lowest total cost for you. This is how many lenders make their money because customers apply based only on the headline rate without doing their homework and comparing the total costs with their own requirements.

The typical APR for an unsecured cheap loan is 6.0% or maybe even lower. The typical rate will be higher for a homeowner or secured cheap loan and there are more factors to consider which can increase the total cost to you. For example, you may be offered a secured cheap loan with a low monthly payment but because the term is high, maybe 25 years, the total cost is expensive.

When you’re looking for a cheap loan you should be aware of the additional charges because they can have a big impact on the overall costs. Some lenders charge an arrangement fee to open the product when you apply. This fee will need to be paid up-front and you will need to consider whether it is worth paying the fee to get the lower interest rate and hence lower monthly payments.

If you think that you may have spare money to pay off the outstanding balance before the end of the repayment term you should review whether the cheap loan has an early repayment fee, or settlement charge. These fees can be high and you need to know up-front before you apply.

Another important factor is the payment protection insurance that you may need to take out when you apply. This insurance will provide peace of mind during the repayment period by covering the monthly payments should you find yourself involuntarily unemployed or off work due to accident or ill health. The majority of policies also provide to pay off your outstanding balance in full in the event of your death.

The cost of payment protection insurance varies considerably from lender to lender and should be a key part of your research in your choice of a cheap loan. You should review if the lender requires you to take their insurance and factor this into the overall costs. If not, and you want the additional cover, you should shop around for the best insurance product for you. Your lender may require details of your insurance policy but this is commonplace in the industry.

The interest rate is an important factor and can help to identify a range of potential cheap loans. However the key to you is the up-front application costs, the monthly payment and the overall cost of paying back the money.

See Myloanchoices best buy secured loans

See Myloanchoices best buy unsecured loans

How to find a cheap loan

Cheap loans are available from many lenders and new products are being launched all the time. It is vital that you take the time to research all the cheap loans available to ensure that you get the best interest rate available but also a cheap loan with low total costs.

The first step when you are comparing cheap loans is to ensure you are comparing like with like. All lenders quote a typical APR which is the interest rate that 66% of successful applicants get offered by the lender. You need to understand your credit history because you may be one of the unfortunate applicants that is unsuccessful and gets offered a higher interest rate due to their poor history of paying off credit.

See Myloanchoices guide to credit history

There are other charges that make a big difference when considering a cheap loan. For example, some lenders charge an arrangement fee when you apply. This fee is separate to the amount of interest paid over the repayment period but you should add this fee to the total costs when you compare cheap loans. You may be better off choosing the best cheap loan with a slightly higher interest rate but no up-front fees.

The interest rate is very important when choosing a cheap loan but it is not the only product feature to consider. Many cheap loans have features such as the facility to take repayment holidays and the potential to pay off part or all the credit early. You need to review the product criteria to decide whether these features are more important to you than having the lowest interest rate.

Myloanchoices offers impartial information and search services on cheap loans to help you decide what product is right for you. You can use our repayment calculators to work out how much your monthly repayments will be for different interest rates. You should then review our best buy cheap loans and review the detailed products features of each recommended product. When you have completed your research you can apply online by clicking through to the lender’s website to start the quick and easy application process.

See Myloanchoices best buy secured loans

See Myloanchoices best buy unsecured loans