Printer Friendly

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 www.goodinsurance.co.uk 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.
COPYRIGHT 2005 Scottish Daily Record & Sunday
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2005 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Features
Publication:Daily Record (Glasgow, Scotland)
Date:Jan 18, 2005
Words:379
Previous Article:THE DEBT ISSUE: Beware The Loan Arranger; Borrowing might seem like a good way to clear festive debt, but don't get ripped off by conmen.
Next Article:THE DEBT ISSUE: money bites - Get the info on cash for kids.


Related Articles
Managing your student loan debt: with the right approach, paying for college can be less of a burden. (Personal Finance).
MONEYBOX; LESLEY COLLINS, head of Independent Women Financial Advisers in Edinburgh and Glasgow, answers your queries.
Lender E-Source sees dramatic growth.
Student debt is profoundly affecting nursing: an investigation into the impact of student loan debt has revealed its negative effects on nurses'...
The student.

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters |