As of November 2012, there was £1419.7 billion in outstanding lending to UK individuals. The twelve-month growth rate in lending to individuals was 0.5 percent. The rate on outstanding unsecured personal loans was 7.71 percent and for a new, unsecured personal loan, it was 6.97 percent.
Though this pales in comparison to the 8,000-percent rate charged by one UK loan shark jailed in 2005, it can be a large expense. Learning how to save money when using loans can streamline household budget management.
Shop Around, Improve Credit, And Get On The Electoral Role
Comparison-shop for a loan to find the best interest rate and terms. Keeping the credit record clean and paying down as much debt as possible prior to making a loan application will improve the chance of qualifying for an inexpensive loan. Credit agencies check the electoral role to verify identity so get on it to prevent loan rejection or qualifying only for high-interest loans. Ask your bank whether it will match the best loan deal found elsewhere.
Check credit rating and research interest rates available to individuals with similar credit profiles. Consumers with poor credit ratings may pay approximately 12 to 23 percent, while those with fair ratings may qualify for loans with an eight to ten percent interest rate. Those with the best credit ratings will receive the lowest rates. Credit unions typically offer good deals for individuals with fair or poor credit.
When completing loan paperwork, do not check the box to have the loan insured by a payment protection insurance (PPI) policy. Purchasing this policy from a standalone provider can save hundreds to thousands of dollars. The Post Office, Paymentcare, and British Insurance offer inexpensive PPI policies. Before cancelling an original PPI policy, ensure that there is no cancellation or administration charge.
Other Considerations for Loans
Getting out of a loan early may incur repayment fees so choose a flexible loan if early repayment is a possibility. If a credit card with zero percent interest is available, transfer debt to this rather than taking out a debt consolidation loan. Do not make any additional purchases on the card and pay off the balance before the zero interest period expires.
Avoid using a secured loan because it carries the risk of home repossession if loan payments stop. Look for value-added loans such as green loans for environmentally-concerned borrowers. This financing saves the planet by planting trees to offset carbon costs of a loan for purchases like a fuel-efficient car or improving home energy efficiency.