Caution: Seven Things To Look Out For When Borrowing Money

Author: Jane Wilson

1. The APR - This is the calculation of the interest payment and any other fixed or variable costs expressed as a percentage of the loan’s repayment value over a year. The APR does not take into account late payment charges or other penalties.
2. Introductory offers - It is not unusual to see a great rate advertised and then to see in the small print that it is applicable for three months or until September, after which it will shoot up.
3. Early repayment fees - If you decide to pay off the loan early, there could be charges involved that can make it cheaper to continue paying off the loan normally. You might find a cheaper loan after 12 months and decide to transfer your old one, but such charges can make the switch pointless.
4. Payment protection plans - Some experts say that payment protection plans are nothing more than a money-making scheme, and when you add up the amount you can pay over the period of a loan, it is hard to disagree. In fact, if you miss a few payments and pay the fines, you will be a lot better off than if you paid the payment protection charge every month.
5. Payment breaks or postponed first payments - Some money lenders will allow you to take out a loan and not start paying anything back for a period of time, often three or six months. Others allow you to have a few months off every year with no penalties. These deals can increase the APR, but are useful if your income is seasonal or unpredictable.
6. Secured loans - Homeowners can benefit from lower rates by using their home as security. People with poor credit histories might find this an essential condition.
7. Your credit rating - Your rate will probably depend upon your trustworthiness, which in turn will be arrived at mathematically by your credit history. Some money lenders have better deals for people with poor credit ratings – shop around.

Jane Wilson gives you the benefit of her many years in the world of finance. When borrowing money use the website http://www.money-review.org.uk to make sure you are considering all the important options.