The one piece of advice that almost any financial advisor will give you with regards to taking out a secured loan is to take the time to compare secured loans before you choose one. The problem is that there are many ways to compare secured loans – and they will not always agree on which is the best secured loan. Faced with conflicting information on which loan is the cheapest or best loan, what's a prospective borrower to do?
The answer is Educate Yourself. The more you know about secured loans, the more you'll understand the importance of various factors when it's time to compare secured loans and choose the best one for your circumstances. Here are ten tips compiled from the best financial advisors on the net to help you compare secured loans online.
o A secured loan is secured against your home, which means that your home is at risk if you fall behind on payments on your loan. On the other hand, interest on unsecured loans – and by extension, the monthly payments – is generally higher. Consider the tradeoffs carefully when you compare secured loans with unsecured loans.
o Borrow the absolute least you can manage. The more you borrow, the more interest you'll pay. The more time you take to repay, the more interest you'll incur. When you compare secured loans, be sure to compare both total cost and monthly repayments to get the best deal.
o Most secured loans charge fixed interest rates, so you'll be able to budget your monthly repayments easily. If you choose a loan with a variable interest rate, be sure to budget for higher monthly payments in case your interest rate goes up.
o While most will tell you that the APR is the best way to compare secured loans, be wary. Lenders can artificially reduce the APR by loading fees into the back end of a loan, so take the APR with a grain of salt.
o Be aware that the 'typical APR' is not likely to be the rate that you are offered. It's also known as the 'headline rate'. The rate you've offered will be based on your credit history, your ability to repay and other factors. 67% of those that qualify for a loan must be offered the headline rate – but that means one in three are offered a loan at a higher rate of interest.
o The most comprehensive way to compare secured loans is to look at the Total Amount Repayable. This will include all monthly repayments, fees and charges, giving you a picture of the total cost of the loan. The lower the total cost of the loan, the better a deal it is – but keep in mind that other factors may influence your decision.
o Remember the golden rule – comparison shopping will always get you the best deal. By comparing secured loans online and in other places, you could save yourself thousands over the course of the loan.
o Do not rule out your local bank, but do not make High Street your first shopping stop. Check around and compare loans online first, then if you must, check with your local banker to see if they're better the rate that you're offered.
o Be aware that you are not obliged to purchase payment protection insurance (PPI) from the loan company, or at all. If you do choose to purchase PPI, it can add as much as half the total interest rate to the cost of the loan. Read the terms closely and be certain that you're getting the coverage that you need. You might be better served by purchasing income protection insurance.
o If at all possible, look for a secured loan that will not penalize you for paying it off early. The law allows lenders to charge up to two months extra interest if you choose to finish paying your loan ahead of schedule.
To make sure you get the best secured loan UK deal, do your research and read the small print before signing on the dotted line.