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 before taking out any kind of loan 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.
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). Using a personal loan calculator to help you budget for your repayments and avoid the chances of running into unexpected charges.
These loans, often available up to £25,000, are available from most banks or building societies and our bank loan calculator is able to show you expected monthly payments, durations and interest rates.
The rate of interest charged on a personal bank loan 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 Calculator
These are sometimes available for sums well over £25,000. However, these are called secured loans as the lender uses your home as its security in case you fail to make payments. For this reason, they are usually only available to homeowners but it’s important that you recognise that your property has the chance of 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 secured loan calculator will make the budgeting process more manageable.
The rate is not always fixed meaning you risk substantial hikes in future, though you may also benefit from a drop in costs.
If you’re 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. However, don’t worry as our loans calculator will do the maths for you.
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.