What can you do to ensure you get the best rate?
If you’re a savvy shopper you’ll be used to sticking to a budget and finding products and services that offer good value for money. When it comes to a loan applying these skills is even more important because you want to make sure you can afford the monthly repayments. So what can you do to ensure you get the best interest rate?
Tip 1: Do your homework
Recent research undertaken by Sainsbury’s Bank¹ shows that 31% of Brits believe they have to get a personal loan from the bank they have a current account with. But you don’t have to take out a loan with your current Bank. Instead, shop around and compare interest rates from a number of loan providers. You can do this online – all with a few clicks.
As well as looking at the APR rate, make sure you also look out for other charges such as set up charges and early repayment fees.
Tip 2: Switch to a lower rate loan
If you already have a loan and you find another one with a lower interest rate, remember that you can switch to a new loan provider at any time - but always check if any exit fees apply. Read our guide to switching loans to help you assess whether switching to a new one could meet your needs, and to glean a few tips to assist you through the process.
Tip 3: Check your credit rating
What’s your score? Credit ratings or credit scores are one of the factors used by lenders to gauge your ability to borrow money and manage debt. The better your credit score, the greater chance you have of being offered a low rate.
Our guide to credit scores will give you all the information you need to manage and improve your credit score. It includes guidance on how to make sure your credit history is correct as well as some tips on how to influence your score such as sticking within existing credit limits and paying all bills on time.
Tip 4: Apply for a loan you think you’ll be granted
This might sound simple but, applying and being refused for a number of loans could damage your credit rating because it could appear to signal problems with debt. Check that you meet any lending criteria before applying for a loan. If you don’t meet the criteria, consider whether you really want to apply.
You should be able to find lending criteria for any provider on their website. If you can’t see it you can ask for it to be provided.
A final pointer: Don’t rush when choosing a loan. Remember, it has to be right for you and your circumstances. Switch off the TV, curl up on the sofa and take your time to search for a loan with an interest rate that you can afford.
¹Sainsbury’s Bank commissioned ICM to survey 2,001 GB adults. Respondents were interviewed by ICM in an online survey between 5th-7th July 2013. Interviews were conducted across the country and the results have been weighted to the profile of all adults. ICM is a member of the British Polling Council and abides by its rules. Further information at www.icmresearch.co.uk.
This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. Sainsbury's Bank accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another Sainsbury's Bank page. All information in this post was correct at date of publication.