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THE DEBT ISSUE: Don't be taken a loan of.

HERE are the things you should check before signing on the dotted line: # Is there an arrangement fee? Some lenders charge them, others don't. At Bank of Scotland, for example, the fee is one per cent of the amount borrowed.

# Is it a secured loan? These are tied to your home and if you get into arrears it can be repossessed. Always opt for an unsecured loan.

# Is the rate the same for all amounts? Don't assume you'll get the advertised interest rate. The most attractive rates are generally reserved for the largest loans.

For instance, Bank of Scotland will lend pounds 7000 at 6.7 per cent, but they charge 17.9 per cent if you only want pounds 1000.

Nationwide is one of the few lenders to charge the same rate (6.7 per cent) regardless of loan size.

#What is the actual rate I will be paying? Most major lenders now use risk-based pricing. They are legally obliged to offer their best rate to only two-thirds of the applicants they accept.

Those with poorer credit ratings will be charged more, but they may not find out until they sign the papers, so make sure you ask.

If you think you could fall foul of this system, go to a lender, such as Nationwide, the Post Office, Tesco or Goldfish, that doesn't use it.

#Do the repayments include payment protection cover? Lenders often add this, but it's only worth having if you actually qualify to make a claim, so check the small print carefully.

Even if you are eligible, stand-alone cover (available from Goodfellows on or call 0870 240 3946) is often cheaper.

# Is the rate fixed? Most lenders' rates are variable and may rise if interest rates generally go up. If you prefer a fixed rate, the Post Office, Nationwide and Cahoot offer these.

# Are there early redemption penalties? Many lenders charge up to two months' interest as a penalty if you clear the loan early. Exceptions include Virgin Money, the Post Office and Nationwide.

Most lenders - including these three - also use a complex interest calculation called the Rule of 78 to increase the total payable if you settle early.

Goldfish, Intelligent Finance and Cahoot (certain loans only) don't invoke either penalty.
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Title Annotation:Features
Publication:Daily Record (Glasgow, Scotland)
Date:Jan 18, 2005
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