What You Should Know before Applying For A Personal Loan (Other Personal Loans)

Member Name: criple

Product:	Other Personal Loans
Date:	24/04/03 (701 review reads)
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Advantages: It May help You

Disadvantages: It May Not

This is op is to be read in conjunction with my Cahoot op for anyone who needs to know a bit about loans in general before reading about a specific product.

This op can be ignored by anyone who just wants to know about the Cahoot Flexible Loan, I have written a seperate op for this.


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Is it any wonder that the majority of us are in debt? Credit cards, loans, mortgages, store cards, you name it, the chances are we all owe money so someone.

The only thing we can really do, apart from not take credit out in the first place is try and get the best deal we can. This might not always mean getting the lowest rate; we have to make sure that the product is also suited to our needs. For example, there is no point in taking out a 3 year loan when you may be planning to have a baby in 18 months time, you would want to have the loan paid off by then without incurring any penalties for early repayment. The same goes for borrowing money against a car that you plan to replace 2 years down the line.

What can we do to match the product as near as possible to our needs?

The best thing to do before you start looking around for any type of finance is to know exactly what you want it for and how much you need to borrow. This may sound simple but I have known people to go out and get a loan without any specific purpose, the money might then be spent on holidays, clothes or whatever takes the fancy, they are soon left with nothing to show for it. There is nothing wrong with borrowing money for holidays but I think you have to be very disciplined and realise that once the holiday is over you are still left paying off a debt.

If you make a list of what the money is for, research how much you need, how much you can afford to comfortably pay each month, how long you are likely to want or be able to pay the loan over (remember things like moving house, having children, finishing fixed term contracts, re
tiring etc) what is important to you, i.e. flexibility to cease payments in times of hardship or getting the lowest rate and paying it off over the quickest length of time. You need to match the features of the product with the benefit to you. If you have access to the Internet it makes life much easier as shopping around for good finance deals is less time consuming and you are not as pressured to make an instant decision. Just remember that if you do actually apply to be accepted for credit on line you will still be subject to the normal credit checks.

OK, assuming you wish to apply for a personal loan, i.e. one that is not secured on your home or any other property. This is different to a mortgage or a secured loan as the lender has nothing for security against what you borrow. Personal loans tend to be for smaller amounts and over shorter periods with higher interest rates than mortgages, this is because there is more risk to the lender. Most high street banks and even supermarkets now offer personal loans. Decisions can be obtained in minutes and it is pretty quick and painless. The better your credit rating/scoring the more chance you have of being offered a loan and you may even get a lower rate. In addition the rate offered is usually affected by the amount you wish to borrow. Surprisingly the more you borrow and the longer time you take to pay the lower the interest rate! This is partly down to the fact that short term loans of a small amount don't make much money for the lender so the more you borrow the more profit they are making, hence they can afford to offer reduced rates.

Once we have decided on how much we want to borrow and roughly over how long you need to start comparing loans. Most loans advertise an APR, this means the annual percentage rate, and this is not always the same as the actual interest rate. This may be because they have a special offer on for the first few months; they have to average it out over a 12-month p
eriod to make it fair to the consumer. It would be deceiving to advertise a loan of 3% if it only applied for the first 3 months and then it shot up to 15%. Loans that have the interest calculated daily are usually better value than those that are calculated monthly. This works because you only pay interest on the amount you owe at that point in time, therefore as soon as a payment hits your account it reduces your balance and subsequently reduces the interest due.

Always use a simple comparison chart by putting in the amount you wish to borrow and the term you wish to pay the loan over. It will come up with a monthly figure and an APR, remember to check THE TOTAL AMOUNT PAYABLE. This is where you will really see the difference, just because a loan is offered at a low rate it doesn't mean that it will always be the best over the term of the loan. Also look out for added extras like unemployment/accident cover as some companies add this to the loan and you will pay interest in this to!

Loans can either be fixed where you pay an agreed amount each month based on what you borrow, this will never change and the interest rate will remain the same until the loan is repaid. The downside with these type of loans is that there may be penalties if you wish to repay the loan early and if you suffer financial hardship you probably won't be able to reduce the payments.

Or; flexible where they work similar to a credit card. You pay interest on what you borrow and can pay off the loan early and increase and reduce payments. The downside to this is that if you only pay the minimum amount off each month it would take years to repay.

The Cahoot Flexible Loan is as above and that is what my next opinion will be about.

If you are interested in a Flexible loan it should be of use to you, thanks for reading.

p.s. the rating below are not applicable so i can't answer them.

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