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Loans -  Basic Guidelines

If you are planning on applying for a loan at any time in the near future, it is wise to know some details about how the process works first; you will then be better equipped to find the best loan for your needs.

These guidelines pretty much cover any type of loan you are considering and can help to ensure you are not charged anything you had not checked for. It is often easy to apply for the first loan you see advertised; by finding a number of companies, it should help ensure you arrange the best deal.

• Using online sites that compare all the lenders and their products has saved a great deal of time; this is where you can compare many loan offers at the same time. Be careful what sort of quote you request because those detailed reports generated when you apply for a loan will require a check on your history each time; however, the more checks that are performed will, unfortunately, have an adverse effect on your credit rating so only ask general questions until you are ready.

• Be careful when looking at the Annual Percentage Rates (APR); often lenders offering low APR's may have other charges that have to be paid which make the cost of borrowing higher.

• Should anything untoward happen during the period of the loan, it is reassuring to know that payments will be maintained; look at the cost of taking out such cover, both with the lender and with other companies.

• Before you decide on a particular loan insurance protection plan, check how much is covered by your employment contract first. When you applying for a loan there is generally no requirement for it to be secured; if your credit score is poor or it is for a large amount then you may need to.

• Although unsecured loans have higher rates, they are less risky because your home will not be at risk if you cannot make the payments. Make sure before you finalize the agreement by signing it that you have checked the small print; this is where all the potentially dangerous clauses are hidden that have financial penalties.

• You have to be careful about the charges that can be levied on late or missed payments and even those that relate to early settlement of the loan itself.

• Although it may seem attractive to have the lowest monthly figure to repay, try to arrange the loan over the shortest repayment period that is financially comfortable; you have no idea what might happen in the future. This rule is not so important if the loan is for alterations or improvements to your home whose worth Increases in time; a loan for a car for instance or a wedding will not warrant the additional repayments especially as it just means you are paying far more in interest.

• Maintaining the payments is crucial so ensure when you apply for a loan that you can easily repay each month; the reason for the loan is also important because you could cause problems with your credit score if there are problems paying, later on.

The opinions expressed are those of the author only. The material is for general information only and does not constitute legal, financial or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation by an FSA authorised company where the market is FSA regulated.