New Royal Bank of Scotland chief executive Ross McEwan promises changes to the way the bank does business. The new chief executive claims that RBS will switch to a customer service-focused model in response to a “seismic shift” in the way bank customers are using RBS’s services. The number of people using bank branches for…
We are bombarded with adverts for loans virtually every day but what are the different types, which is best for you – and how could a loan calculator help?
It’s crucial you do your homework first as the wrong choice could result in you being hundreds of pounds out of pocket. Always use your loan calculator to help you make a decision.
Here is what is available:
Personal Loan Calculator
These are the most common form of loan and the simplest. Here, you are given money by a bank or building society and you pay it back over a set period, usually of between three and ten years. Use our loan calculator to help you budget for your repayments.
These loans, often available up to £25,000, are available from most banks or building societies.
The rate of interest charged is normally fixed though the amount you pay depends on how much you are borrowing. Often, the more you borrow the lower the interest rate.
Secured Loan Repayment Calculator
These are sometimes available for sums well over £25,000 but the reason they are called secured loans is because the lender uses your home as its security in case you fail to make payments.
They are therefore usually only available to homeowners but your property can be repossessed if you fall into arrears.
Secured loans usually come with lower rates than personal loans but are usually repaid over a longer period – sometimes up to 25 years – so can cost you far more in interest over the term. Our loan repayment calculator will make the budgeting process more manageable.
To illustrate this, if borrowing £5,000 at 10% over three years, you’ll pay approximately £800 in interest. Borrow the same amount at 5% over ten years and you’ll pay around £1,360 in interest. Our loan calculator will do the maths for you.
The rate is not always fixed meaning you risk substantial hikes in future, though you may also benefit from a drop in costs.
Which is best?
This all depends on your circumstances. Generally speaking, if you need to borrow smaller sums, a personal loan costs less in interest and comes with less risk; as your lender cannot repossess your home.
Will I qualify for a loan?
During periods of economic gloom when banks are more reluctant to lend, you will need a good credit score meaning you need to have kept up with repayments over previous years. You’ll also need a loan calculator to help you work out your budget going forward.
In other times, conditions are less onerous though it is always wise to keep up to date with all your bills as those with better credit records tend to be given better rates.
Bad credit loans
Some lenders offer loans to those with patchy or poor credit histories but you usually pay far more in interest for the privilege. Our loan calculator can take this into account.
Interest rate warning!
Before applying for a loan, it’s worth considering that lenders only have to offer the advertised rate to two thirds of successful applicants.
This means a third of borrowers, often those with more patchy credit records, will pay more than they expected. Unfortunately, many applicants go in blind as there is little way of predicting the rate offered. At least with a loan calculator you know where your finances will be going forward.