Personal loans are notoriously rigid in terms of their repayment schedules. Once locked into the deal you're tied to set monthly payments, with any early repayments usually subject to hefty penalties – often a month or two of interest – which could easily minimise the benefits of paying early.
However, this could be set to change with the introduction of flexible loans, where a few key lenders are offering borrowers the chance to make early repayments whenever it suits them – without being lumbered with extra charges.
Lloyds and Halifax are two lenders currently offering flexible loans, available to those looking to borrow between £7,500 and £25,000, but only current banking customers will be eligible. However, this level of flexibility comes at a price – the headline APR is a lot higher than with standard loans (up to 7.4% APR), which will result in higher monthly repayments and potentially higher overall costs if the loan isn't paid off any earlier.
The key, as with any type of borrowing, is to be realistic. Make sure you're confident you can afford to make at least the minimum payments and, if you think you'll have the facility to pay off more at some point, a flexible option could be worth considering.
If not, then the traditional (albeit highly rigid) format might be the better solution, thereby reducing the risk that you'll end up paying extra in the long run.
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