Low Cost Loan: Your Best Bet Is To Shop

2007-03-08 10:33:40

( Financial )



Low cost loan is usually only for those with very good credit rating. Companies calculate the annual percentage rate (APR) based on a system called risk-based pricing. Factors such as your circumstances and your credit history form the basis of the risk-based pricing.

Those with perfect credit rating are eligible for low cost personal loans. Even then, to be able to get the best deal, you need to shop around for companies that offer the best low cost loan in the market. Online lenders can offer low cost loan because they have fewer overheads.

If you want to go for known high street banks or financing companies, do comparisons. There are plenty of loan providers and each one has different loan cost structure depending on a host of factors specific to the company such as operating efficiency, investment strategy, etc.

In comparing companies offering low cost loan, do not only consider the annual percentage rate (APR) that they charge. Take into account other variables such as whether the APR is fixed or variable, the cost of the loan arrangement fees and early repayment fees, among others.

More often, loans with fixed rate are better since you are protected from rising interest rates. However, if you find your fixed loan rate substantially higher than that of the market, consider refinancing. The savings you might be getting from lower interest rate would probably more than offset your refinancing costs.

When you take out your low cost loan, some creditors would charge you a loan arrangement fee to cover their operating cost for arranging the loan. However, because of stiff competition among lenders, some companies do not charge this fee, so you might want to consider their offer.

Early repayment fees or the fees that creditors charge borrowers who would want to repay their loans before their expiry can add up to a substantial amount. Thus, when choosing a loan offer, choose one with no repayment fee especially if you have plans of paying off your loans early.

In summary, the best deal that you can find when looking for a low cost loan is one that has a low APR and no arrangement and early repayment fees. You will be surprised to find out that there are a lot of companies offering such deals given stiff competition among them for business. It’s just up to you to shop and to know where to look for.


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