Secured Loan UK | How to Calculate the Real Cost of Borrowing
The interest rate
The rate of a secured loan UK deal is calculated by the APR, or the annual percentage rate - this means that is the percentage of the loan interest you must pay back over 12 months, without fees. For example, a £10,000 loan with a rate of 6% means you must pay back £600 over the year, or £50 a month. Remember - this will not go towards the loan itself, only the interest demanded from the lender.
The lower the rate of the secured loan UK does not mean a better loan. A slightly higher rate may be worth your while if the extras are lower, or it could be a better choice if you can have a longer life on the loan, or even if you have bad credit. Remember, the APR is only the first signpost.
The extras
It might be better to look at the TAR, or total amount repayable, before taking a secured loan UK. This will include any charges like lender's fees, insurance, penalties - tiny things like this can add up and add as much as a percentage to your loan. A good adviser can help you get through each part of your secured loan UK, outlining exactly what the deal will really cost.
Make sure you go through all the extras with the lender also - much of the small print with loans can be baffling and alien, but not understanding an extra could lead to heftier payments.
Your situation
It is essential you know how the secured loan UK will affect your other financial commitments. Will it impinge on other debts? Will it make your mortgage payments impossible to meet? Will a secured loan UK stifle your monthly outgoings? A good secured loan UK can set you free from your financial doldrums, but it can also add heavy chains to you. Well-planned finances can be the difference between a good loan and a deal that just costs too much.
The future
A secured loan UK will not just affect your present situation, but it will also be instrumental in any future financial situation. Loan repayments are critical in achieving good credit for future loans - they are what define you as a borrower, in the eyes of a lender. Also a secured loan UK is money taken from your property. You have to be sure you can afford to spend the equity now, rather than saving it later.
So, a secured loan UK is not just going to cost you that little APR percentage, it may be a whole lot more, and it may affect your decisions for years to come. So before you decide on a secured loan UK, take some advice from a professional and be perfectly clear about how much the loan really costs.
