Most people today are in the midst of paying off one kind of loan or another, and millions of people everyday take out new loans for one thing or another. However many people tend not to know whether the loan that they are getting is the cheapest available to them. Fortunately there are many easy ways of comparing different loans and determining that you are always getting a good deal.
One thing to consider with loans, as well as what the interest rate is, are the other terms of the loan. For example, some loans will allow flexible repayment options, and will allow you to pay extra or less per month according to your own finances. Also these loans will allow you to pay off part or all of the loan early if you have the money. However there are some loan agreements which have a fixed repayment plan, which don’t allow you to pay back the loan any faster then the initial payment plan dictates.
Probably the easiest way to compare different loans is simply to use one of the many comparison sites out there that will compare different quotes from loan companies and other financial institutions. Although there are many different companies represented on each site, it is also always worth checking a few different comparison sites. This is due to the fact that not all loan companies are represented on all sites. It is also always worth checking what deals your own bank has, as they may offer better rates to existing customers than a different bank would to a stranger.
Increasingly the larger banking institutions are offering better deals than they have in the past, the reason being they are all getting more competitive with each other for customers. This is exasperated by the fact that many institutions are having trouble with liquidity of late, and is forcing them to offer more generous deals to new customers. Obviously not everyone will be able to get a good deal, but if you have a good credit score and financial history, then there are excellent deals to be had.
Ensuring you have a good credit score is another essential aspect of getting a cheap loan in most cases. The better your score is then the better the deal you can get and the more flexibility they tend to allow you. If you have a bad credit score then you can still get a loan, although the interest you will be charged is generally higher. Also for things such as flexible repayments and the actual payment amount each month, bad credit scores tend to mean that you will be more restricted in your options.
Choosing whether you want to get a fixed rate or variable rate loan is one of the most influential aspects over how much any particular loan will cost you. Fixed rate loans are charged at a set amount of interest from the outset, and wont become lower or more expensive.
Variable rate loans interest rate will rise and fall as the economic conditions of the country dictates. Which will be the most cost effective in these cases is something of a gamble, due to the fact that the future economic conditions are difficult to predict.
If the economic conditions dictate that the interest rates should fall, then fixed rate loans will become more expensive. However if the economy goes into a recession, then variable rate loans will become expensive, as the interest charged will rise, and you will have more to pay back.
In this respect choosing between the two might seem difficult, although another factor is how fast you think you will be able to pay back the loan. If you can pay it back faster than the payment plan, then getting a lower variable rate if the rates are low is a good way to save.
There are some kinds of loans now available that combine the two types of interest, usually beginning with a fixed rate and moving into a variable rate after a certain number of years. Fixed rate loans are generally seen as the safer option, because of course although they might be relatively expensive, if you can afford them initially, then you should always be able to.