There are so many lenders available that it can be rather daunting trying to pick the lender that will be the best. Although there are many factors that might be important to you in a lender such as them having a good reputation and good customer service, often it is the cost that is key for us all. Obviously, no one will want to pay more than they have to and so how can you find the cheapest?

Choosing the right loan

It is important first though to pick the right sort of loan. You will know that there are many different types and you will need to think about which will be the most suitable for your needs. Consider how much you want to borrow and whether you want regular repayments and this should help you to pick between them. Howe good your credit rating is will also be a factor as will what you are using the loan for. Some loans, such as mortgages are designed for a specific purpose. A payday loan and guarantor loan will be available for those with a poor credit record. A personal loan has regular repayments but an overdraft and credit card do not. If you just want a small amount of money then an overdraft, credit card or payday loan will work whereas if you need a larger amount you will need to consider a personal loan.

It is important to choose the right loan because it will help you get the best value for money. You will also get the right amount of money to suit your purpose and you will be able to decide on what sort of repayments you want as well. Once you have chosen the best loan type then you can pick between lenders to see which offers it at a good price.

Picking between lenders

It is easy to think that the lender with the lowest advertised interest rate will be the cheapest. Therefore, you might look at a comparison website and pick the cheapest form there. Although this can be a useful tool it does not tell the whole story. Firstly, unless the rates you are comparing are the APR then they do not allow for any other costs of the loan. The interest rate is often just one part of the loan charge and there may be additional set up fees as well. If you look at the APR figure this includes these fees and therefore is a better way to compare the lenders.

There are also fees that you may be charged. You might, for example make a late repayment or miss one and there will be charges for this. If you decide that you would like to repay the loan early there may be an early redemption fee. Although you probably hope that you will not have to pay these, it is worth being aware of how much they are. This will be another factor that will make picking between the different lenders a bit easier.

It might seem like a lot of hard work, but it is well worth doing. You could find that you will save a significant amount of money as a result of doing the work and therefore you will really gain from it. A few hours work could save more money than you could be paid in that time, depending on how much you are borrowing. The more you are borrowing the more you will pay in total in interest and charges and therefore the more worthwhile this research will be. However, even a small amount of research could save you some money.

Some people choose to use an independent financial advisor to help them with choosing between lenders. This is something that will cost money but it could be worth it. Find out how much their hourly rate is and then consider whether it is worth it. If you are taking out a large loan then you are more likely to be able to make a bigger saving compared with a small loan. If you have the time to do the research yourself then you may rather save the money, but you will find that financial advisors will know about more loans than you and they may even have access to lending that you cannot get because you have to apply through a financial advisor. You might want to use websites instead but remember that they can be biased. Lenders will pay commission on leads to websites that recommend lenders and so those websites may only choose to list those lenders which pay out the highest amounts of money. You will find that all of them are limited in how many companies they list as well, which means that you will not be getting the full selection.

If you take out a loan or are thinking of taking one out then it is important to make sure that you will be able to afford the repayments. However, it can be tricky to know exactly what you have to do to find out what those repayments will be and know whether that is an amount that you can afford. Then knowing what to do should you struggle with repayments is also important.

What are the repayments and can you afford them?
To find out how much you will need to repay each month you should be able to simply ask your lender. They should be able to easily find out for you how much you will be expected to pay. It is worth noting though whether the interest is fixed or variable. If it is fixed then you will be paying that amount all of the time or always during the fixed rate period. If it is variable then it can change, meaning that it can go up or down, making your payments rise and fall. If payments go down this will not be a problem, but if they go up then you will need to be sure that you will be able to afford them. They are likely to go up if the base rate increases, but the lender may decide to put them up outside of rate changes as well.

In order to work out whether you can afford these repayments you will need to make sure that you have enough spare money in your bank account each month. To find out you need to take a look at your bank statements and see what they normally say for each month. If you tend to have money left over and it is more than enough to cover the loan then you should be fine. However, if you do not, then you need to be cautious. Think about where the money is going and how easy it will be for you to make sure that you have enough. It might be that you transfer some money each month into a savings account and you could put that towards the loan repayments instead. It may be that you always spend all the money you have and you could cut back on that spending. It is worth giving it some thought.

Top tips to ensure you can always afford them
You may have worked out a way to afford the repayments to start with but you need to be confident that you will always be able to afford them. There are lots of things that you might be able to do and it is worth being aware of them and thinking about them so that you can do them if you need to.

  • Always compare prices – comparing prices on everything that you buy means that you will not be spending more than you have to. Obviously, you do want to make sure that you get good value for money, but if you are buying a specific item then compare retailers to get it for the cheapest price you can.
  • Consider second hand – it is worth considering buying second hand items. Things like books are very easy to buy second hand both in shops and online and you pay a fraction of the cost. You can also easily buy clothing second hand as well as children’s toys and you could save a significant amount of money by doing so.
  • Choose cheaper contracts – if you have contracts for your utilities, mobile, television, broadband and landline then look for cheaper alternatives. Think about whether you really use what you are paying for or if you can get away with paying less and not really missing out much. It is also worth comparing different suppliers as they could save you a lot of money.
  • Only buy what you need – it is good to think about everything we are buying and whether we really need it. There are lots of things that we could potentially buy for ourselves, perhaps getting brand new things or replacing things that are getting old fashioned or beginning to wear out. Think about whether you can hold on until you have finished repaying the loan before you buy these things.
  • Sell things you do not need – if you have a lot of things at home that you do not really use, then you could sell them to make some money. These will not help you out permanently as you will only be able to sell them once, but they could help you out of a tricky situation should you need some money quickly. If you have a lot of items then this could be more helpful and could help cover the cost of more than one payment.
  • Work more hours – it may be that you will be able to increase the amount of hours that you are working so that you have more income and that will be able to help if you start to struggle with the repayments.
  • Apply for a pay rise – it could be worth seeing whether you can get a pay rise. These can be tricky to get, but make sure that you are working hard and proving that you are worth it and then ask to see whether it is possible.
  • Overpay when you can afford to – it can be good to overpay a bit on the loan when you can. This means pay more than necessary back on it. This will allow you to repay it more quickly and the interest charged will be less so the loan will be cheaper. This could bring down your monthly payments which will help you to afford them. Do check though, as there could be a fee associated with this called an early redemption fee and it may not be worth doing if this fee is too high.