Along with politicians and journalists, bankers have never been about to win any popularity contests. A reluctance to lend, the end of free banking, high credit card charge charges, massive overdraft fees, and all despite a tax payer bail-out, means many of us are feeling very let down.
So more bad news for the consumer, is the recent report by moneysupermarket.com, which revealed that the cost of smaller loans has increased by 135% over the last four years. In short, the squeeze on borrowers requiring a smaller amount of money means it is now more expensive to borrow under £5000 than it has been for 10 years.
Yet there is some hope. Before you give up on the idea of borrowing, there is a way round this. You can play the banks at their own game by borrowing a little more than you actually need. Unlike smaller amounts, the cost of borrowing between £5,000 and £10,000 has come down, so it can actually be cheaper to borrow a larger amount than a small one.
Moneysupermarket.com has worked out that a borrower taking out a £4,500 loan over five years, with the best rate available (13.8%), would pay £1,643 in interest over the time of the loan. But increasing the amount by just £500 means you could qualify for the far more competitive rate of 8.8% – meaning you’d pay only £1,150 in interest for the length of the loan.
What’s more, you need not pay any more in monthly repayments, and will have saved £493 in interest.
(Source: moneysupermarket)
The only drawback is that banks do reserve the best rates for their most risk free customers, and you do need to remember that not everyone is going to qualify for a market-leading rate like 7.8%. It really is down to your credit score. Although a lender has to offer the typical rate to 66% of people who successfully apply, if your credit history isn’t squeaky clean, it’s unlikely you will get a rate like that. So it’s all the more important to shop around for the best rate you can find.
You can get help with finding the best loan for you and save time by using a good loan broker, or you can try and improve your credit record before you apply for loans to maximise your chances of the best rate. As long as you haven’t got any defaults or CCJs on your credit file it shouldn’t take more than 6-18 months to clean up your rating.
To do this, you need to show that you can manage credit properly. Basically by borrowing money – spending money – and paying back the money ON TIME.
So to improve your credit rating to get the best loan rate on offer, try the following:
Pay all your bills on time (eg, mobile phone contract, mortgage, any outstanding loan repayments)
Make sure you are registered to vote on the electoral roll. This shows you have been living in one place.
Apply for a credit repair card such as Capital One. Use it to buy goods you would normally buy anyway, and MAKE SURE YOU PAY THE FULL AMOUNT OFF EVERY MONTH BEFORE THE DATE DUE.
Loanfinder are a leading UK independent loan brokers, finding loans for customers by matching them to lenders without charging any upfront fees. The loanfinder service is straightforward. We review everyone’s situation and search for loans across a number of different lenders (over 200 loan companies). Loanfinder are able to find the best loan on the market for the client.
To find out more or apply for a loan, simply visit our website or contact us by email at info@loanfinder.co.uk
