You don`t have to be a banking expert to know that the recession and financial crisis has hit banks hard. Firstly they are having to significantly shrink their balance sheet and secondly they have become increasingly wary of bad debts.

As a consequence, loans have become increasingly harder to get and only those with really impeccable credit histories will find anyone wanting to lend to them. And when you do the price in terms of rates and fees has gone up quite a bit.

What Type Of Loans Are Available?

Personal loans are great for lump sum borrowing to make a specific purchase. The rate might not be especially cheap but your rate and monthly payments will be fixed making budgeting straightforward. With personal loans the key principle to keep the cost down is to borrow as little as you can, repaying as quickly as possible.

An alternative to a personal loan is a secured loan. Avoid these. The rate might look great but these will typically be secured on your home which means it might be re-possessed. And unlike a personal loan the rate is variable as Base Rate moves or at the whim of the lender. Use as a loan of last resort.

Another alternative, especially if buying a car, is to get your loan from the dealer or the finance house. These should be OK but make sure you compare APRs. And remember to factor in any discount if you paid in cash.

So where to start to get a loan?

As always, start with the online price comparison websites. These will show you the best rates on the market at the moment. Be prepared to pay from 9% upwards. Always make sure you are comparing APRs and note the difference between a headline typical rate and the rate you get. Not everyone gets the headline rate.

Some price comparison sites will estimate your credit score and highlight those lenders prepared to lend to you.

In general your bank will be the best place to go for your loan assuming your credit score is good. It knows more about you and will use sophisticated credit scoring techniques to assess your risk. There is every chance your bank will help you when others might not. Indeed you may find that many of the best rates are only available to existing bank customers.

The supermarkets have recently entered the market and they are offering some great rates to those with a good credit score.

If you are still having difficulty getting the loan at an affordable rate, try a Credit Union loan. These are co-operative non-profit making organisations run for the benefit of its members. Many no longer require you to have savings with it before you can borrow. Well worth a look with rates around 13%-15% currently.

And one final tip for you. If you are looking to borrow for under a year or less than £1000 you might find that a credit card is the ideal way to borrow the money. There are some great 0% deals out there but do remember to pay it off before the 0% deal ends.

Alternatively you could consider a cashback credit card and earn while you spend. A great way to borrow and to be rewarded.

 

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