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How to get the best personal loans How to get a good loan interest rate |
How can interest rate changes affect you?
Dramatically, if you have a variable rate loan. Most homeowner loans and also many unsecured
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You see, lenders are careful to avoid losing money on their loans and if their APR is lower than the Bank of England rate, the amount you owe on your personal loan is actually decreasing. A variable rate loan will never let that happen, making sure that the rate is always a few percent higher than the Bank of England base rate.
My loan rate just increased. What should I do?
The first rule is not to panic. You aren't losing a fortune every day, so you needn't jump to the nearest option, but you do need to do something soon.
First you should look to see if you can find a history of the loan rates with your lender. Some lender's rates fluctuate more than others, so this might not be immediately dangerous - have a look to see whether the rate has changed in the past and, more importantly, whether it decreased again.
Unfortunately, you'll probably find that your loan repayments with your current lender are going up for good, in which case you need to start shopping around. As Anna Bowes, an Independent Financial Adviser at Chase de Vere said:
Do not let inertia get the better of you. Your bank or building society is not going to reward you with loyalty. (BBC News)
Try to calculate exactly how much a change of lender might save - or cost - you. If you search for the best loan for you with our ( remortgages ) comparison service, you should be able to find the best rate for you and see how much you could save.
Once you've checked for the saving, you need to keep an eye out for hidden costs. Most personal loans (especially variable rate ones!) charge you an extra month's interest or ( cheap loans ) some fee for paying out early, so you'll need to subtract that from your running total. If your change in payments is still worth it, it's time to switch!