Fact vs Fiction: The Truth About Loans
As a way to help consumers spread the cost of purchases, the right loan can be a great option for borrowers. There are many different types of loans available, depending on your needs, and many have plenty of flexibility when it comes to choosing the terms and repayments you want. However, many loan lenders can take advantage of consumers and offer less than ideal terms and hidden fees. If you are looking for a loan, how can you ensure you are getting the best options? Here, we look at the facts behind loans and how you can make better choices.
How Can I Choose Trusted Lenders?
One of the biggest concerns is choosing a trusted source to borrow money from. As there are many different options online, far more than just a few years ago, staying safe online by making the right choice is crucial. When deciding on a lender of unsecured loans, check to see if they are authorised by the Financial Conduct Authority (FCA). As they are the industry regulators, they provide a list of trusted and approved lenders, ones that work to responsible lending guidelines and treat customers fairly. You can either search for the lender on the FCA register or find the authorisation number on the lender’s website. If you discover a lender but cannot find this information, it is best to steer clear.
Should I Be Paying a Fee for a Loan?
You may find lenders that offer you exactly what you want for the terms you need but charge a fee for doing so. Some credit brokers may do this, where they refer you to a third-party lender after helping you search for one, as well as direct lenders having an admin or hidden fees within the terms. Fortunately, there are many other lenders and brokers who do not charge fees, including late payment fees. If you feel like the quote provided will mean overpaying for a product or service, compare with other trusted lenders before signing up for the loan.
How Do I Choose Terms Affordable for Me?
Some lenders may offer you restricted terms based on your circumstances. This could mean you advise how much you want and then the lender provides a counter offer. This could mean you borrow a higher or even lower amount than what you wanted originally and have to choose terms that don’t fit in with your situation. Ideally, you want to find lenders who provide you with flexibility, enabling you to choose how much you want to borrow, how long for, and the frequency of repayments. Having this option alongside transparent terms so you can see exactly how much the interest charge will be, helps you make a better choice. Seeing everything upfront with no surprises avoids agreeing to something you are unsure of, or worse, can’t afford.
Should I Be Able to Settle the Loan Early?
This will depend on the type of loan you choose, but the majority of lenders will allow you to settle the outstanding balance early. Products like personal loans have the total interest charge added at the beginning, so if you can settle early, you could have some of the remaining interest removed. Other products charge daily interest instead, so may charge an early settlement fee to clear the balance sooner. It’s important that you are aware of this scenario for your loan before agreeing to it and that you are happy with the terms.