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Andy Williams is our Online Savings Expert at CreditChoices.co.uk and can assist with all monetary matters no matter how big or small, from piggy banks to re-mortgaging and beyond.
Our expert says...
Hi Harriet…..
Thanks for your question concerning this topical issue.
Might i direct you towards a recent investigation, which found that the average car dealer finance loan is subject to 9.88% APR. Baring in mind that standard unsecured loans weigh in with an APR at around the 7% mark; there could be a better deal for you than the finance terms offered by the dealer. Choosing a low rate personal loan over ahead of the car dealer’s terms could net you a saving of up to £1000.
There are a number of unsecured loans on the market, and it’s imperative that you shop around to get the best deal. Moneyback(www.moneybackbank.co.uk) loans are currently attracting the best rate of interest at 6.7%. You must have an impeccable credit rating to successfully apply for an unsecured loan, if your credit file is even slightly blemished then you will be considered too much of a risk for this type of loan. The advantage of an unsecured loan is that you’re not required to own a property to qualify. Also, if you were to default on repayments, your home is not at risk.
Unsecured loans do have their drawbacks though. The terms of the loan will reflect the risk profile of unsecured loans, and characteristically will allow lesser amounts to be borrowed and a higher rate of interest. The size of an unsecured loan is generally smaller than that of a secured loan. As a result, the term of the loan will often be shorter. You should always ensure that payment deadlines are met, because whether the loan is secured or unsecured, court proceedings will still be brought against you if you fail to keep up with repayments.
If you’re refused an unsecured loan, there are still a number of avenues open to you:
Secured Loans – If you’re a homeowner, then you may be able to take out a secured loan using your property as collateral. Be realistic though, if you consider the repayments to be beyond you then don’t agree to the loan. The prospect of having your home repossessed should be a stark enough warning not to take secured loans lightly.
Dealership Finance - You can get a loan direct from your car dealership but be sure to do your homework first. Don’t be rushed into making a decision, and make sure that you always ask for the APR and repayment terms first. Don’t make a decision based on the duration of your repayments (i.e. three years), concentrate on the amount of interest you’ll be paying instead.
A question you should ask yourself of course before getting into a financial quagmire is ‘Do I really need this loan?’ We have produced a guide to help you answer this particular quandary.
