Almost everyone will, at some time during their adult life, take out a loan. The current economy in the UK makes it difficult to get a loan with a competitive interest rate, but there is something to be said for shopping around, rather than taking the first one you see in desperation.
Firstly, different lenders have different criteria they look for in a borrower. While you may fit the ideal profile of one lender, you could be less desirable in the eyes of another.
You may also be able to get a different interest rate depending on how much you borrow, and over how long. A low amount taken over a short time will invariably yield a lower rate than a large amount over a long time – which could be viewed as a riskier option in the eyes of the lender. So only take out the minimum you need, and choose the shortest payment term you can afford.
Consider your standing with your bank. If you've been a customer for some time, and have a good history with them, you might be offered a better interest rate than if you 'cold call' a loans company who've never heard of you before. Of course, this will depend somewhat on your bank's policies and standard APRs, but it's a good place to start looking.
Obtain a copy of your credit file. This is the first place a potential lender will look when considering you for a loan and if there are any defaults, or too many missing payments on it, you could be facing a higher rate or even a flat-out refusal. By checking your credit report before you begin applications you give yourself time to rectify any errors or arrears which may be on there, and increase your chances of getting accepted with a good APR.
Don't go mad and apply for dozens of loans all at once. Each company you apply with will leave a record of their search on your credit file, and too many of these give a bad impression to subsequent lenders. Find a company which you think may be likely to lend to you, apply to them, and if they refuse, look into the reasons. You can ask the company why they refused, and you can also re-examine your report to see what could have been the problem.
If you have a mortgage, consider
homeowner loans as they tend to have lower rates than
personal loans, which aren't secured on anything. The latter type of
loans are better for small amounts but the interest rates are usually higher.
