All you need to know about tak­ing out a loan

Gloucestershire Echo - - CASHING IN - MARTIN LEWIS You can Tweet me @Martinslew­is Martin Lewis is founder and chair of Moneysav­ingex­pert. com. Get his free Money Tips weekly email at money saving­ex­pert.com/lat­est­tip

PER­SONAL loan rates are at all time lows. Yet debt is like fire. Done well it’s a use­ful tool, done badly it burns. Here are my six key need-to-knows.

1 ES­TAB­LISH IF YOU RE­ALLY NEED TO BOR­ROW?

IF YOU’RE al­ready in debt and strug­gling, you can’t bor­row your way out of it. Get free debt coun­selling from char­i­ties cit­i­zen­sad­vice. org.uk, na­tion­aldebtline.org, or stepchange.org – or ca­puk. org for emo­tional sup­port.

2 BE­FORE AP­PLY­ING USE AN EL­I­GI­BIL­ITY CHECKER US­ING a loans el­i­gi­bil­ity cal­cu­la­tor is the right start­ing point. Tell it your in­for­ma­tion and it shows you which loan you are most likely to be ac­cepted for. It does that with­out im­pact­ing your credit wor­thi­ness. The fact you can get a loan doesn’t mean you should. Some el­i­gi­bil­ity check­ers in­clude both per­sonal loans and more un­savoury high in­ter­est loans (for the sake of

trans­parency mine at moneysav­ingex­pert.com/ Loan­scalc ex­cludes high in­ter­est loans) oth­er­wise you can end up in the sub-prime mar­ket with­out re­al­is­ing it. Loan ac­cep­tance is about more than just credit his­tory – income plays a key role. If you have a good credit score, a lender may ac­cept you if you want to bor­row £2,000. If your income isn’t enough, it may re­ject you for £5,000.

3 RATES ARE AT ALL-TIME LOWS

HERE are the quick best buys (go through an el­i­gi­bil­ity cal­cu­la­tor to see what you’ll be ac­cepted for).

■ £1,000-£1,999: ad­mi­ral.com is 13.2% rep APR

■ £2,000-£2,999: zopa.com is 12.9% rep APR and ad­mi­ral. com is 13.2% rep APR

■ £3,000-£4,999: ad­mi­ral.com is 6.4% rep APR

■ £5,000-£7,499: zopa.com and rateset­ter.com are 3.3% rep APR and ad­mi­ral.com is 3.4% rep APR

■ £7,500-£15,000 bank. mark­sand­spencer.com is 2.9% rep APR

4 NOT EV­ERY­ONE WILL GET THE AD­VER­TISED RATE

ALL loans are ‘rep­re­sen­ta­tive APRS’. The ‘rep­re­sen­ta­tive’ bit sadly means only 51% of peo­ple who ap­ply will get the ad­ver­tised rate. The rest can be charged more, and there’s no limit how much more.

5 THE LONGER YOU BOR­ROW, THE MORE YOU RE­PAY

THE longer you take to re­pay, the more in­ter­est ac­crues. For ex­am­ple, a 15% oneyear loan costs far less in­ter­est than a 4% loan over five years. Only bor­row for the length you ab­so­lutely need to re­pay in. Re­duc­ing the term will make a dif­fer­ence to the in­ter­est you pay.

6 IF BOR­ROW­ING UN­DER £3,000, YOU MIGHT BE ABLE TO GET A 0% LOAN

IF WHAT you need to bor­row for can be paid on a 0% credit card, then get one of those. As long as you clear it be­fore the 0% ends and don’t miss re­pay­ments, there’s no cost. The key is, will your credit limit be big enough? Even if you can’t pay on the card, there’s a way to get a 0% credit card loan. You do this via a few spe­cial­ist cards that of­fer ‘money trans­fers’. These cards let you trans­fer cash from the credit card to your bank ac­count for a small nom­i­nal fee, so then you owe the card at 0%. See my guide at moneysav­ingex­pert.com/ mon­ey­trans­fers

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