Cheap Loan

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The cheapest loan can be judged by the APR of the product, and also be sure to see if any benefits associated with the product make it more attractive. Ask about redemption penalties too as they could cost you dearly if you pay the loan off early.

Every lender will tell you they can offer you a cheap loan. But do they mean cheap in terms of monthly payments? That might just mean they'll spread the loan over a longer period than their competitors. You'll pay far more, but it'll feel like less. Perhaps they offer a low "typical" rate which might not be the rate you pay. Most lenders judge each case individually, and you may not be offered the best possible rate. The best rates are always reserved for larger sums, so if you need less than £5,000 it's highly unlikely you'll get the best deal.

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What does count as a cheap loan? Well, it changes month on month. Ten years ago, an interest rate of 10% was very acceptable indeed but today it's considered high. In general as a rule of thumb, below 8.0% is a very good rate. You can also get below 6% but this is usually only available to secured loan applicants with their existing mortgage provider.

All that said, sometimes it's worth sacrificing a few percentage points on a cheap loan if there are other benefits attached to a more expensive one. For example, those loans offering a payment holiday might be most useful. Always consider the benefits in financial terms before you buy because a cheap loan on paper might be more expensive if there are no additional benefits.

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