Should I Pick the Lowest Rate Guarantor Loan?

When picking any loan we will often compare the costs by looking at the interest rate. We may then conclude that the one with the lowest rate will be the best. If you are picking a guarantor loan, you may very well feel this way and search for the one with the lowest rate. This could work out well, but it is worth looking at other factors as well before you decide on which one you want to go for as the rate is not the only factor that you need to be thinking about. There are other things which could also be important.

Look at fees and charges

It is worth noting that when you look at the interest rate this is not always the only thing that you will pay and so you may be comparing lenders like for like. The AER will include any additional fees or charges as well as the interest charged by a simple interest rate will not. This means that sometimes the figures that you see are confusing. It can be best to contact the lender and ask them exactly how much you will repay in total including all interest, fees and charges. Then you will have a monetary figure that you can use to compare lenders. This can be very much easier and you can compare each lender then and know exactly how much you will have to repay.

It is also worth taking a look at any additional fees they might charge. This is most common if you miss a repayment. They are likely to charge you fees for this and it is worth finding out how much these will be so that you can compare the lenders and see whether there are any that seem very much more expensive than others.

Consider the term

It is important to think about the term of the loan. This is how long the loan will go on for. If it goes on for a long time, you will have more repayments to make but they will be for lower amounts. However, this will make the loan more expensive because you will be paying interest on what you owe for longer. If you repay over a shorter period, you will not need to pay so much interest but your repayments will be larger. You may prefer to repay over a shorter period so that you can get out of debt as soon as possible, or you may not mind and prefer to have smaller repayments.

Can you manage the repayments?

It is really important to make sure that you can afford the repayments. Always make sure that you know what you will be repaying and then calculate whether you can afford it. You can do this by looking at previous bank and building society statements and seeing how much money you would normally have available to pay for something like this. Then you will be able to know whether you will be able to afford it. If you feel you will not even be able to afford the cheapest loan, then you may be able to look to see whether there are areas where you can reduce your spending. You may spend on things that you can do without or you may be able to buy cheaper alternatives in order to free up some money.

What is the lender like?

It is important to know a bit about the lender. You may need to get in touch with them for some reason and you want to make sure that they are helpful and polite. You may also be keen to know if you can trust them. If you do not know much about them then you will find information on their website. You might also want to look at personal finance websites where there may be more information about them that you can read. Beware of bias in information you read online though and if you can, then asking friends and family might give you a less biased idea of what the lender is like.

So, although the interest rate is a factor when picking a guarantor loan, it is important that you also look into other things. You need to think about the full cost of the loan as well as how long it will take you to repay it. It is really important to make sure that you are able to manage the repayments and that you trust the lender. There is the information available for you to find out these things and it is well worth spending the time doing the research. It could not only help you to get good value for money from your loan and not pay more than necessary but also to find a lender who is friendly and helpful.

Do Interest Rates on Credit Cards Really Matter?

Credit cards will tend to vary in the interest rate that they have although, they will all be fairly close in order to stay competitive. We are often encouraged to pick the lowest interest rates in order to make sure that we do not pay more money than we need to. However, it can seem like a lot of hassle to do all of this research and the rates change a lot anyway so we may not think it is worth it. If we already have a card them swapping may just feel like too much of a hassle. It is worth thinking though, about whether the interest rates are important and what impact they might have on you.

If you repay the card in full

If you repay your card in full each month then you will never pay any interest. If you are therefore in this situation, you may feel that the interest is just not at all relevant to you. You are right as long as you continue to always repay the balance in full. Having a direct debit set up to do this is the safest option as you will then never forget to pay off the card. However, you do need to make sure that there will be enough money available to repay it and so setting up that direct debit just after you have been paid would be very helpful and is something that you will be able to negotiate with your card provider.

If you are paying the card off in full then it can be worth looking into a cashback card or similar. These will give you rewards for spending money on the card. The interest rate tends to be higher, but if you never pay any interest then this will not matter. Make sure that you find one with a reward that suits you. You do need to be careful though as the rewards are often based on spending and if you spend more you will often be able to get a better reward. This can sometimes lead to the temptation to spend more than we otherwise would so that we get a better reward. If you are buying the same things but just using the card rather a debit card or cash, for example, then this is fine, but if you are buying extra items to get the reward then this is not. This is because you will be spending more money than you will be gaining and it is not worth it.

If you have an outstanding balance

If you have an outstanding balance on your credit card and do not pay off the full balance each month then you will be charged interest. This will be paid each month and it probably will not look like that much. However, if you find a card with a low interest rate then you will be paying less. If your debt is outstanding for a significant period of time, then this interest will add up and the difference will really show. Consider a few percent different over a few months and you may not think it is worth worrying about but if your debt continues over a couple of years or you keep topping up the debt by using the card, then the interest rate difference can be significant.

To prepare for the future

If you do normally repay your card in full, be prepared for the future and any financial changes that may happen. You may find that you do get to a stage where you are no longer able to repay the card in full each month. If this is likely then you need to make sure that you do get a card with a low rate. Hopefully you will be able to know that this going to happen and get your card swapped over in time, to one that is cheaper. If you leave it until you have unpaid debt then it may be more difficult as you will need to do a balance transfer and there are fees associated with this.

So, in conclusion we can say that interest rates do matter, even if you repay the card in full. This is because you may not be able to afford to repay it in the future and s you need to be aware of how much interest your card holder charges, so you can switch if necessary. If you do have outstanding debt then the interest rate is very relevant. You do not want to pay more than necessary and therefore it is worth making sure that you are not paying a high rate for your card as this will cost you more and make it harder for you to be able to afford to repay the outstanding balance.