Loan tips are a necessary precaution for those seeking loans. If you have never taken out a loan, you may be totally confused about what to look for. Below are some critical tips which will assist you in this process.

Secured and Unsecured Secured loans derive their name from the fact that the debt is held against your property. This means your property is at risk and may be repossessed if you fail to keep up with your monthly repayments.

Rates – The advertised rates you see on many loan deals are ‘typical rates’ which means that the loan provider uses a strategy called risk-based pricing. At least 66% of successful applicants must be offered the typical rate but a third could be offered a higher rate.

Interest and Loan Term – The cost of your monthly repayments will obviously depend on the amount you are looking to borrow, but it is also dependent on the period over which you will repay the debt. You can reduce your monthly repayment by opting for a longer term. However, this will be more expensive because you’ll pay more in interest.

Credit Card and Short Term Lending – If you only need to borrow over a very short term – say 12 months or less – then you may be better off with a 0% purchase card. By making a purchase on a 0% card you will have the length of the introductory offer in which to pay back the money you owe without paying any interest. Don’t be tempted to keep spending until you have cleared the balance however, because at the end of the 0% period you will be charged interest at a much higher typical rate.

Hidden Fees – Read the lender’s terms and conditions thoroughly before applying for a loan and check for hidden fees. For example several lenders charge administration or arrangement fees to set up a loan, while others will penalise you for making late payments.

Repayments and Variability -The rates on unsecured loans tend to be fixed, but many secured loans have variable rates so your repayments could rise. Make sure you know what you are signing up for otherwise you could get a shock if your lender suddenly hikes the rate.