It would be great if we could always afford to pay for whatever life throws at us, and if Christmas, birthdays and car repairs were all budgeted for well in advance. But this is reality. The real world isn't always quite so kind, so predictable. And so, there are times when we all have to reach out for a little financial help in the form of a loan.
There's a wealth (see what I did there?) of people queueing up to lend you money to help stretch to meet the unexpected, especially if you believe the all-singing, all-dancing, brightly coloured friendly adverts on the telly. But the telly doesn't tell the whole story. Loans come in all shapes and sizes, and it's important to find the one that fits you, so you have to look at the small print.
The APR is the easy bit, though it doesn't tell the whole story – if you only want to borrow for a relatively short time it's not all that relevant, though it does give you a rough idea of how expensive or cheap a loan may be. You also need to look at any arrangement fees, transfer fees, early repayment fees, and the PPI that's still in the news. All of these can add to the cost of a loan, and aren't always so easy to spot upfront, so it's a good move to check them out before you commit.
Obviously, when we take out a loan, we expect to be able to pay it back. It's kind of the deal. But life can get complicated sometimes, and if circumstances change it can be a whole lot harder than planned, so it's a good idea to look at what might happen if you can't pay the loan back. Some lenders add penalty fees, others sell the debt on to a collector who adds their own fees. Some take you to court and try to get a County Court Judgement (CCJ) to force the payments, or if your loan is secured on your property, a lender could repossess or force a sale on your home.
Securing a better deal
Offering security can be a good way to get a cheaper rate loan – as I said a loan secured on your home is an option, but only if you own your home in the first place. Pawn shops are making a reappearance on our high street, with a new shiny exterior. Or there's the option of a log book loan, where the loan is secured on your car.
With a logbook loan, you keep the car and drive around as normal, and as long as you make the payments, nothing changes. Aside from a more accessible lending rate, they can be arranged and the money lent within hours of application if you need funds urgently. Also, you know from the start what the risks are: as with any secured loan, your car could be repossessed if you don't keep up the payments.
A responsible lender won't lend you more than you can afford, and will make sure everything is clear to you before entering into an agreement. If you're not sure what the terms mean – ask!
Late or missed repayments of a loan can cause you serious money problems. For help & advice, visit Money Advice Service or Citizens Advice Bureau.
This post has been sponsored by Auto Advance, one of the UK’s longest established logbook loans companies. Auto Advance is a member of the Consumer Credit Trade Association (CCTA) and adheres to its code of practice.