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- Broadly speaking there are two types of loan - Secured Loans and Unsecured Loans. Secured Loans (some times called home owner loans) are a type of loan where the lender takes a charge over your property as security for the loan. They are often easier to obtain than unsecured loans (also known as personal loans) and can be offered for larger amounts over longer periods. Personal Loans are where the lender has no security of a charge over property and is lending you the money based on your track record of making payments.
- Loans can be used for many purposes for example as home improvement loans, or debt consolidation loans to name a few. However cannot be used for business purposes.
- The interest rate you have to pay when taking out a loan depends heavily on your credit score. It is a good idea to check your credit file to ensure you know what type of rate to expect. The rates that lenders advertise on the television or on billboards are usually the best rates that they can offer to people with excellent track records of making paying payments. If you have had credit problems in the past, expect your rate to be higher.
- Many companies advertise debt consolidation loans. Although these types of loans are useful if you have large amounts of credit with different lenders, remember that if your monthly payments are ONLY lower because you are borrowing the money over a longer period, it is likely you will pay more overall. Make sure you get a competitive APR that is lower than the majority of your existing credit arrangements, and then your debt consolidation loan will be worthwhile.
- Shop around, use the internet, press and visit different banks or with secured loans, a secured loan broker, especially because they are able to offer exclusive deals on secured loans that the high street banks cannot.
- Many loans come with the option of taking payment protection, a type of insurance designed to cover your payments should lose your job or become able to work. This built in insurance is usually very expensive and banks will often try hard to sell it to you. Consult an independent adviser if you are unsure as external insurance policies are often far cheaper.
- Think about your budget when taking out a loan, how much can you afford to pay? It is best to pay the loan off as soon as you can to avoid paying too much interest over the long term, however do not over-commit yourself. Failure to make payments on any types of credit can have an adverse effect on your credit score and if you take out a secured loan your home will be at risk too as the lender can apply to force you sell your home to repay any amounts owed to them. Tailor the loan around your budget.
- When comparing which loan to apply for, take note of the APR (Annual Percentage Rate) this figure allows you to directly compare the cost of one loan to another, this not only takes in to account the interest rate of the loan but any other underlying fees the lender may be charging for giving you the loan.
- If you are finding it difficult to repay a loan, do not bury your head in the sand, falling behind on loan payments is detrimental to your credit file. It is always best to contact the lender as soon as possible and they will help you come to an arrangement to pay what you can afford. Always address these types of issues early to avoid unnecessary charges.
- Loans under £25,000 are regulated under the Consumer Credit Act. You can find more information about credit at www.consumerdirect.gov.uk
- Always shop around; use a mortgage broker/financial adviser that have access to the whole mortgage market.
CALL ME BACK. Have a whole of market mortgage broker give you a call to discuss you needs at a time to suit you. - Do your homework; research mortgage deals on the internet and in the press, you will be able to get a good feel of the market and what rates are available to you.
- Be realistic with how much you can afford to pay each month for your mortgage. Many people are now experiencing difficulties making their mortgage payments because they borrowed large amounts when the interest rates were more favourable. Do not assume that just because you may be able to afford the payments now that you will be able to in the future.
- The deal with the lowest interest rate doesn't always mean it is the cheapest; usually large fees are charged with deals at lower rates, most of the time they work out more expensive than higher rate deals with no fees. Ask your adviser to do a “total to pay” comparison to see exactly what the difference is, you may be surprised.
- Always make sure you are given a Key Facts Illustration before applying for a mortgage. Every adviser/lender in required by law to give you this document. It gives all the details of the mortgage deal you are applying for so that you can compare it with deals elsewhere.
- There is no right or wrong when choosing a mortgage product, you must decide what is right for you, it may not be the lowest rate that's out their, or the same as your best mate's deal he/she keeps bragging on about. The option(s) you choose should meet your present needs and be flexible enough so that if those needs change as some point in the future, your mortgage can too.
- Always make sure your receive a Letter of Recommendation from your adviser when you have applied for a mortgage, this will give a breakdown of the adviser's reasons for recommending that deal to you and which of your needs/requirements have been met. This should be read in conjunction with your Key Facts Illustration.
- Think into the future, plan your mortgage around where you might be in the next 2, 5, 10 or 25 years for example. Ask yourself do you want to move house, have a family, send your children to university or retire early? These are all reasonable questions to think about now.
- Explore your needs for protecting your income or mortgage payments should you lose your job, become unable to work through illness or in the worth case death? This is very important for families who have a main income earner. Ask yourself how your family would pay the mortgage/bills and maintain its current standard of living if your income was suddenly gone for whatever reason?
- The Financial Services Authority regulates the mortgage industry. If you have any queries what so ever or want to check on any advice you may have been given by someone, visit their website www.fsa.gov.uk for details.
- Be wary of “cheap” insurance policies. They are usually cheap because they are not as comprehensive as others.
- Make sure you read the policy document thoroughly and check exactly what you are covered for. You may find something that you deem important that isn't covered and likewise there may be optional extras included in the policy that you simply do not need.
- Do your home work; check the internet and press. Get comparisons and make your choice from there.
- Consult a mortgage/insurance broker or a financial adviser; they will be able to help you. Although not all advisers have access to the whole insurance market they will be able to give you comparative quotes from the insurers they use and identify any insurance needs you may have.
- Insurance products should meet your present needs, whether those needs are for insuring your home contents against theft or your income should you be made redundant. There are many forms of insurance that can be used for many different purposes; Car Insurance, Buildings and Contents Insurance (Home Insurance), Accident, Sickness and Unemployment Cover (ASU cover, some times called mortgage payment protection or mortgage repayments cover) Life cover, Critical Illness cover and Private Medical Insurance are just some of the main types you will come across.
- It is a good thing to ask your self the “what-ifs” for example, what if I was to have an accident in my car? What if I was to get ill? Etc... Many people are too quick to dismiss such events with comments such as, “that won't happen to me...” but take a moment to think who you know that may have had their house broken into, lost their job, developed cancer or some other critical illness or even worse died. All these have considerable knock-on events and usually the biggest and most frequent is the financial effect.
- When applying for an insurance product of any sort, always make sure you give as much detail as possible. A high percentage of claims are declined because of non-disclosure or inaccurate information given at application stage.
- Make a note of when your insurance policies are coming up for renewal, give yourself plenty time to shop around, it is usual for your renewal quote from your existing provider to be more expensive than your original policy. Be ready to change to a more competitive insurer, just make sure the policy covers exactly what you require.
- Many insurance policies have what is called a policy excess. The policy excess if the initial amount you have to pay of any claim. For example if you make a claim for £1000 on your contents insurance because your house was broken into and your policy excess is £100, your insurance provider will pay £900 of the claim and you will be expected to stump up the other £100. Usually the higher you have your excess amount, the cheaper your policy will be.
- The insurance industry, like the mortgage industry, is also regulated by the Financial Services Authority and therefore you can find further information from the FSA by visiting www.fsa.gov.uk