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Is Interest Rate the Best Way to Choose Between Loans?

There are many loans on the market and it can be hard to know which one will be the best for you. Many people use interest rates as a way of comparing them, as do most comparison websites. However, there are other differences between loans and lenders which should also be considered when you are thinking about which one to choose.

If cost is a very important factor when choosing a loan, which it is to most people, then you need to look at the other loan costs as well as the interest rates. There could be costs for setting up the loan, which should be considered as some can be a lot more than others. There may also be other charges if you do not repay on time, want to skip a payment or repay the loan early. It is good to have a look at what these charges are by looking at the terms and conditions. You may not think that they will apply to you, but it is still worth checking to see whether they are unrealistically high. If you are picking between loans with the same interest rate then these things could be the best way to pick between them if cost is the main factor for you.

It is also worth considering other factors as well though which might have an influence on which loan is the best. It could be worth starting by looking at reviews of that loan and the lender to see what other people think of them. There may be comments and complaints which you could find will make you feel that you do or do not want to take out such a loan. These could vary a lot, but it is worth bearing in mind that people tend to complain more than they praise so you are more likely to see negative comments rather than positive ones.

You may be interested in the reputation of the lender to see whether you think that they will value your custom and respect you as a customer. Some of this information may be able to be gained from looking at reviews, but it can also be useful to look at their website. This should give you a feel as to what they are like and how they feel. It can also be really useful to contact their customer services and speak to them. Ask some questions about what they can offer you and things like that and you will get an idea of how helpful they are as well as how polite and this could give you a good impression of how customers might be treated. It can also be useful to speak to friends and family about which lenders they have used in the past as well as currently and see whether they have had any positive or negative experiences that they want to share with you.

You may want to have a branch near to you so that you can make your payments or go in and see someone if you have any problems and discuss things face to face. Some people will be happy to deal with their lender online or over the telephone but there will be others that would rather not do things this way. Consider what type of person you are and how you would like to deal with your lender.

You may be concerned about what might happen if you struggle to make repayments. You may feel that you want a lender that will be flexible or even a product that will allow you to have payment holidays with no consequences. You may be able to find products and lenders like this but they could be more expensive than those that do not and you will have to decide whether you think that it is worth paying the extra money for this service.
So, interest rate is very important when choosing a loan as it tends to determine the overall cost. However, there are other actors that you should consider alongside it when you are making your decision so that you make sure that you have the very best loan for you. Some might be very similar price wise and so it is these other factors that could make a difference and help you to make your decision.

Differences Between a Career Development Loan and Student Loan

If you want a loan to help you with studying then you may wonder which to take. A student loan and a career development loan are both designed to help cover the costs of courses.

Firstly there are restrictions on who can get the loans and so you will need to find out whether you will qualify to get one before you consider applying. A student loan is for anyone doing an undergraduate degree or postgraduate degree that has not received funding for a course in the past (such as a previous grant or student loan) and it covers up to four years of study. A career development loan is for any course that will improve your career prospects and you will have to apply and see whether the course that you are planning on doing fits in with their requirements.

The way that the interest is calculated on both loans is the same, with interest not having to be paid until the course is ended. The repayments are very different though. With a student loan you will not have to make any repayments until you are earning enough money. There are certain thresholds you will pass for salary where you will have to increase how much you are paying. With a career development loan you will be expected to start making the repayments as soon as the course finishes regardless of whether you are earning anything or not.

The interest rate on a career development loan is set differently to a student loan. The student loan is an inflation linked amount but a career development loan is set more based on the Bank of England base rate and is therefore likely to be a lot higher.

As a student loan is only paid when you are earning and is linked to salary then paying it off early is not normally wise. After thirty years any remaining money owed gets written off and therefore does not need to be paid back. However, all of the money borrowed for a career development loan has to be paid off and therefore you will have no choice but to pay it back. Paying it back early could save a lot of money as you will save the interest that you would have paid had you not paid it back early. There may be an early redemption fee, but it is worth checking as not all loans will have this.

So if you are making a choice between the two types of loan then you firstly will need to check which will be the available for you to be able to get. If you can choose between the two then you need to consider the cost of the loans and the way that they are repaid. It is likely that the student loan would be a better and cheaper option than the career development loan.

If you only have the option of a career development loan then you might find that it will actually be expensive compared to other types of loan. Personal loans, for example, can be pretty competitive and so it may be worth seeing whether you can get one of these instead. It may be difficult, especially if you will be studying full time as there will be no guaranteed income to repay it when the course has finished. However, if you are in a long term relationship, you may be able to use your partner as a guarantor or even get them to take out the loan on your behalf.

It may be tempting to save up for a course, rather than using a loan. This will mean that you will be able to avoid debt while you are studying and therefore not have the worry of repayments. However, this will delay you being able to start your course until you have saved up the money and it could be a significant amount to have to save. Obviously how long it takes will depend on your ability to save, which will be determined by your income and expenditure. It can be well worth considering doing this if you are considering a career development loan as they can be expensive. However, with a student loan it is probably better to take it out and repay it through your tax code as expected as you will be likely to repay less than the full amount.

When is it Best to Choose a Fixed Rate Loan?

There are many types of loan but some of the main differences between certain loans is the option of having a fixed rate versus a variable rate. A fixed rate means that the interest rate is held at a constant rate for a certain period of time. A variable rate will change whenever the lender chooses, usually in response to changes in the base rate set by the Bank of England but they can change them at any time. There are lots of reasons for choosing each type of loan, but there are some situations when a fixed rate loan could be the most sensible option for you.

If you will only just have enough money each month to manage your loan repayment then it can be a good idea to fix the rate so that you protect yourself against any possible increases. If you think that you will find money very difficult to manage, then protecting yourself against even a small rate change is a sensible idea. You will know exactly how much you will need to pay back each month and will have no nasty surprises, at least until the fixed rate period ends.

If you think interest rates are likely to rise, then it could be a good idea to fix your rate and hope that it will be a cheaper option than the variable rate. It is not easy to predict rate changes, but there are some things you could consider when trying to make this prediction. If the Bank of England base rate is very low and has been low for a while, you might think that rates would be more likely to go up than down. However, very recently this has not been the case and the rates were held at record low amounts for a long time and then put down even more. This shows how difficult it can be to predict this. You may also feel that certain situations politically, across the world or economically could have an influence on interest rates as well. Some people worry that leaving Europe could cause enough economic instability to mean that rates will rise a lot, but others feel the opposite. It can be difficult to predict and so it could also be worth looking at what economists are predicting. They are experts, but they will also be relying on guesswork as not only will they be having to predict the future, they will also be having to imagine what might be going on in the minds of those making the decision with regards to interest rate changes.

You also need to consider what will be best for you. Maybe the peace of mind of having a fixed rate will be worth it for you, regardless of what might be cheaper. You may worry every month when a debate takes pace to consider whether the rate should be changed and hope that you will not have to start suddenly finding more money to pay out towards your monthly loan repayment. With rates so low at the moment, even a small increase can actually make a big difference to the amount of interest you will be repaying in monetary terms.

It is worth noting that a fixed rate can be more expensive. Often when you take out the loan, the fixed rate is higher than the variable rate and unless the variable rate goes up significantly, it could work out dearer. However, as rates are so hard to predict it is hard to know until afterwards which will be the best value for money. This means that trying to work out whether it will save you money can be very hard. It could be worth asking a financial advisor what they think might happen and what they would do with regards to choosing between the different types of loans.

Decisions like this can be very tricky. However, you need to do your best to imagine how you might feel if you have each type of loan and which might be the best for you. Do lots of research and then you can be more confident in the decision that you make and know that even if you have made the wrong decision you have at least done everything that you can to inform yourself and make the best possible decision that you can.