One thing that really annoys me is the number of loan adverts featured on TV. You know the sort: they typically feature a breezy family, happily contemplating the electrical goodies they will purchase with their shiny £25k homeowner loan, little caring that the "affordable" monthly repayments can mean paying thousands of pounds in interest, leave them tied down until retirement, and put their home at risk!
Now don't get me wrong - I know there can come a time in all of our lives when we need a bit of financial aid. A much-needed car giving up the ghost, a boiler dying a death or a period of redundancy can leave us strapped for cash - in which case a good, low-rate unsecured personal loan can be a lifesaver.
But borrowing large sums of money simply because you fancy a new kitchen or conservatory, or to pay for a flat screen TV or extravagant holiday to "keep up with the Jones'" are not my idea of dire emergencies.
But if there is something you really hanker for, what can you do? Well, there are several alternative approaches - see Alternatives To A Personal Loan below for the lowdown on the different options.
Nevertheless if you need a large sum of money quickly, an unsecured personal loan can be the cheapest way to borrow. Take a minute to check out these five top tips before signing up:
1. Don't borrow more than you need
If a personal loan is your only option, try and borrow as little as possible. The extra will only mean accruing more interest and will take you even longer to pay back. And, on that note, keep the term down to the shortest time you can manage - paying off that loan in two, rather than three years may hurt, but can save you hundreds in extra interest.
2. Don't risk your home!
This is an important one - know the difference between a secured (sometimes called "homeowner") and unsecured loan. The former is "secured" against your home, so if you miss a payment, you really do put the roof over your head at risk. Pick an unsecured loan and you'll sleep better at night!
3. Compare TAR, not APR
Although most loan rates advertised often show the APR (Annual Percentage Rate), the TAR (Total Amount Repayable) will actually show you how much you'll need to repay (your loan, plus any charges). Compare the TARs of the products you're interested in and you'll really see which is cheapest.
4. Can you pay off your loan early?
Some lenders will punish you by charging extra interest if you should be able to pay off your loan early, while others apply no fee. Find out if you'll be charged an Early Settlement Penalty before signing up, as the right choice could save you some money.
5. Watch the extras
Finally, check the small print for any sneaky extras, such as charges for obtaining your money by cheque, or via a CHAPS transfer. And as always, watch out for the payment protection insurance (PPI) that they try to slap on your loan. It's almost always hideously overpriced, un-claimable by many and cheaper alternatives can easily be found elsewhere for those that still want it.-Alison Hunt