Choosing the Right Loan - Loans - News - Moneyfacts

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Choosing the Right Loan

Choosing the Right Loan

Category: Loans

Updated: 31/10/2008
First Published: 29/08/2008

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

At the start of next week the new 58 plates will be rolling off the forecourts and motorists would of likely searched hard to find the best deal. However, I suspect much less time and effort is put into finding the best finance deal. Getting the finance choice wrong could prove a costly mistake.

Before opting for the convenience of forecourt finance, it's worth checking out how this compares with other deals on the market. There are over 40 providers offering a range of unsecured loans and many offer different rates depending on if you apply online or over the telephone.

Latest Moneyfacts.co.uk research has shown that, on a £5K loan, the difference between choosing the best and worst loan deal could cost you an extra £769, while the wrong choice on a £10K loan could see you out of pocket by an extra £2.4K – or to put it another way, increases the cost of financing your car by a massive 14%.

Moneyfacts.co.uk - things you should consider when shopping for your car loan:

  1. When shopping around for your new loan, use the total repayment figure to compare deals. This is especially important when opting for providers insurance, as a competitive interest rate can more than be wiped out by expensive payment protection cover
  2. Shop around for your loan, and for the best possible package shop around for your insurance separately. Independent providers such as Paymentcare.co.uk and British Insurance offer a more flexible insurance package at a fraction of the cost.
  3. 93% of loan rates are either typical pricing or personal pricing, so don't assume that the rate advertised is the rate you will receive, as this will depend on your credit rating.
  4. Don't be fooled by specialist car loan deals. Often the freebies, discounts or perks don't make economical sense if you have to pay a higher interest rate.
  5. Be realistic about the term of the loan you choose. Cars suffer rapid depreciation, so make sure that you don't find yourself still paying for your car long after it has reached the scrap yard.
  6. Be aware of the cost of repayment holidays. For example, if you took a loan of £10K over five years at 8.0% APR and took a three month repayment holiday at the commencement of the loan, you would pay an additional £156 in interest charges.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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