Long Term Loan Planning

Long Term Loan Planning
Choosing a​ long term loan deal that’s right for you​ takes some careful thought and planning .​
When comparing and choosing loan deals,​ many people fall into the​ trap of​ thinking that the​ lower the​ APR deal,​ the​ cheaper the​ loan will be overall but that’s far from being the​ case.
Firstly,​ when considering a​ loan that’s going to​ run over many years,​ it’s important to​ take into account factors such as​ how much you’re looking to​ borrow and whether you​ want a​ secured or​ unsecured loan .​
Unsecured loans will usually carry a​ higher APR than a​ secured loan to​ reflect the​ greater risk to​ the​ lender but,​ for smaller amounts of​ borrowing,​ the​ fact that they are usually paid off quicker means that the​ cost of​ borrowing is​ likely to​ mean an​ overall lesser repayment total than if​ you​ were repaying the​ loan over a​ longer period.
The secured loan route does have its advantages in​ that if​ you’re looking to​ borrow in​ excess of​ £25k and wish to​ repay that over more than 10 years,​ the​ interest rate is​ going to​ be lower as​ the​ loan is​ guaranteed against your property so there’s less risk to​ the​ lender .​
By spreading out the​ cost of​ repayments over a​ much longer period,​ this might suit somebody who want to​ keep their monthly repayments lower but the​ overall cost of​ the​ loan at​ the​ end might be considerably higher so it’s important to​ do the​ maths and work out what the​ total overall cost of​ the​ loan might be.
In addition,​ with a​ secured loan,​ you​ need to​ ensure what,​ if​ any,​ additional charges you​ might incur .​
Some companies might charge you​ a​ fee for administering the​ loan and you​ may also incur penalty charges if​ you​ pay off the​ loan earlier than your agreement (known as​ an​ early settlement or​ early redemption charge) .​
Also,​ if​ you​ move house during the​ term of​ your loan agreement,​ some companies can charge a​ transfer fee.
Payment protection insurance is​ also another thing to​ consider on​ both secured and unsecured loans .​
If you​ became ill and couldn’t work or​ you​ lost your job,​ by having this protection,​ it​ can bide you​ time as​ the​ insurance company will continue to​ make your monthly repayments on​ your behalf for a​ pre-determined period .​
However,​ it’s important to​ make sure that you​ qualify before you​ take out this protection as​ certain insurance companies won’t pay out to​ self-employed people or​ those who are in​ receipt of​ benefit so you​ could find that you’re paying out for something that’s not necessary or​ applicable to​ you​ .​
Payment protection insurance can also add on​ a​ considerable sum to​ the​ overall cost of​ a​ loan and,​ if​ you​ do decide to​ add it​ on,​ be sure to​ shop around for the​ cheapest deal .​
Many lending companies will try to​ ‘bundle’ it​ in​ as​ part of​ the​ loan package they offer you​ but you’re under no obligation to​ take it​ with them or​ to​ even take it​ at​ all .​
However,​ with a​ secured loan,​ you​ should always bear in​ mind that if​ you​ can’t meet the​ repayments,​ your home could be at​ risk.
When planning for a​ long term loan,​ you​ also need to​ consider things such as​ whether or​ not you​ opt for a​ fixed or​ variable interest rate as​ that can affect your total repayments .​
In fact,​ there are so many variables,​ that the​ best bet is​ always to​ seek advice from an​ independent financial advisor or​ a​ reputable broker .​
They can discuss the​ right kind of​ deal for you​ .​
The bottom line is,​ however,​ to​ think beyond the​ APR and to​ consider just how much both your monthly repayments will be and the​ overall cost of​ your loan at​ the​ end .​
If you’re happy with both,​ then it​ will probably be the​ right deal for you.

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