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It is easy to be confused by the huge array of loan options available. To help you find a loan that suits you, use the following loan tips, but always check the small print and think carefully before making any financial decisions:

Loan Tip 1: Understand typical APR

Financial companies are required by law to publish their APR or Annual Percentage Rates. This is the interest rate that loan providers charge per calendar year. This covers all the standard charges such as arrangement costs and annual fees. However, be aware that APRs do not take into account any late payment fees or other non-standard costs.

For an APR to be considered typical, this interest rate must be offered and approved to at least two-thirds of the loan applicants. However, this effectively means that the remaining third of approved applicants will not be offered this typical interest rate.

When taking out a loan, it is crucial that you understand this to make sure you are offered the rate you think you will be given. It is safer to ask for the Total Amount Repayable or TAR. This will indicate the exact amount you will have to repay overall.

Loan Tip 2: Keep your credit score healthy

More and more people are now applying for loans online. This enables them to secure instant approvals on their loan requests. However, it can be unproductive to submit loan applications to more than one loan provider within a short period of time. For each application that you make, a record is left on your credit score.

Loan providers refer to this score when making a decision about your loan application. If you have lots of applications on your record, this may make you appear desperate. This is not a good impression to make on potential lenders and may adversely affect your loan application.

Loan Tip 3: Put up collateral

Secured loans are loans which are given out against a particular asset, such as your home. While they obviously pose a risk to your assets, they enjoy better rates and can be a good way of getting access to cash if you are confident that you can make repayments regularly.

Always be realistic when you take out a secured loan as you may end up losing your home if you default on your repayments.

Loan Tip 4: Pay off a loan early

Watch out for loan providers who impose exorbitant early settlement fees to discourage you from clearing your debts early. Remember that paying off your loan early or in the shortest time possible is always a good idea, provided you do not incur high charges. The longer you take to pay your loan, the more interest you will pay, therefore increasing the total amount to be repaid.

Loan Tip 5: Choose a fixed interest rate

It is generally a good idea to taking out a fixed rate loan. This provides you with the security of having a set repayment rate for an agreed period of time, which varies depending on the size of the loan. This is useful as it protects you from random rate increases and market fluctuations.

Loan Tip 6: Think about income protection

To give you peace of mind, it may be worth taking out income protection. This is an insurance product which will provide you with a regular monthly income if you are unable to make your loan repayments. Alternatively, you could take out payment insurance which offers you protection you from getting into debt if you lose your job, become unwell, or have an accident.

Loan Tip 7: Employ a loan broker

Some borrowers avoid using the professional services of a broker because they think it is costly. However, hiring a broker not only helps you to get the best deal, but it can also enhance your chances of being approved for a loan. Brokers are better placed to present your personal case to loan providers. They may also have access to exclusive deal, not available to the general public.

Loan Tip 8: Have loan flexibility

It is always valuable to take out loans which offer a certain degree of flexibility such as payment holidays, making overpayments, or underpayments. If you suddenly find yourself short of cash or if you are starting a family, this sort of flexibility could come in very useful. You will, however, pay for the luxury of having this flexibility as then overall loan will cost more in the long run.