Money Saving Loan Tips Part 2
Payment Protection Insurance and Loan Penalties
When taking out a personal loan you have more to consider than APR charges, loan companies charge a variety of penalties depending on the company and additionally payment protection insurance is a product worth investing in to cover yourself should the worst happen. However these penalties and PPI shouldn’t just be taken for granted as a necessary burden.
While there is little way of avoiding additional outlay in certain circumstances, shopping around can save you substantially. For example there are a number of companies, particularly online, that won’t charge any early repayment penalties such as Morgan Stanley. Or companies such as Intelligent Finance which offer consumers the choice of a loan with no early repayment penalties or a loan at a lower rate that does charge for repaying early. Some companies also charge arrangement fees, however these are often quite small charges and if the loan on offer is the most suitable for you it might be worth considering whether you will save in the long run by paying the arrangement fees. The key is to identify what you need from a loan company and shop around for one that won’t charge you unnecessarily.
PPI isn’t necessarily something you should avoid, it can be a very useful product should you find your circumstances change in ways no one can predict. However often the PPI that comes with your loan is overpriced and can cost you significantly more. Some providers charge up to £2,000 for PPI on a loan over 5 years.
An alternate way to ensure you are covered and save money is to investigate insurance from a different company. Insurance companies such as Payprotect offer competitive rates on PPI that should offer you much better value than the insurance offered alongside your loan. Not all companies offer bad value on PPI, Cahoot currently offers very competitive deals, so it’s worth investigating what’s on offer in order to get the best deal.
Special Rates and Loan Amount
Be aware that often there are special offers or deals available on loans, for example this summer a number of loan companies have offered special deals for their customers. Loans also tend to be priced at different interest rates depending on the amount you plan to borrow.
Generally speaking on an unsecured personal loan you can expect to get a much more favourable rate of interest on amounts over £5,000 in comparison to loans under £5,000. This being the case, if you plan to borrow just below the threshold for the cheaper rate, sometimes it may make sense to increase your loan amount slightly to get a better deal.
However while you may find you get a better deal by borrowing more, be wary of falling into the daytime advertising trap of borrowing a bit extra to treat yourself. If you can already get a great deal, or the amount you would need to increase by is significant enough to mean adding unnecessary debt then don’t. At the end of the day it’s not just about getting a great deal but making sure your debts are manageable and whatever you spend the extra money on will be effectively incurring interest.
Knowledge is Power
This has been mentioned in passing already, but one of the best ways to ensure you get the best deal currently on the market and learn more about what’s available and what might best suit you is to shop around. The more loans you look at and consider the better your chance of finding one that’s ideal for you, not only in terms of interest charges but also in terms of penalties and insurance costs.
It doesn’t necessarily have to mean a massive time investment either if you shop online or via the phone for your loan. While shopping around remember that the loan market is expanding rapidly and is no longer restricted to your high street banks and building societies. While it is worth considering the traditional lenders checking out online loan companies and the supermarket can reap financial rewards.
If the idea of shopping around seems onerous, consider how long you’ve spent choosing and planning what you will spend the money on, ensuring you get both what you want and a good deal whether it’s a new kitchen or a new car. Making the decision to take out a loan is unlikely to have been a quick one and at the end of the day it is a product, a large financial commitment that you should spend as long deciding on the details as deciding to embark on