Nowadays a secured personal loan is very easy to obtain. If you are a homeowner with reasonably good credit, you will find any number of lenders anxious for your business. The problem may be to decide which one to choose.
One way of comparing lenders is to look at the APR (annual percentage rate) offered. This can help in comparing one lender with another. However, it's still difficult to work out what interest rate you will actually be paying on your secured personal loan. In their ads lenders usually display their "typical APR" - so this doesn't tell you what YOURS will be. Much depends on the length of the loan term, the amount borrowed, and your own credit rating.
So how is it worked out? Well, it can be quite complicated. Generally, if your credit rating is good, your interest rate will be lower. Again, the larger the amount of the loan and the longer the loan term, the lower the interest rate will be. However, if the loan term is longer, remember the total amount of interest you will pay on the secured personal loan will be greater.
Instead of looking at the APR, you are better looking at the TAR (total amount repayable). This includes all charges - so the lowest TAR will probably represent the best deal.
When you are comparing interest rates on secured personal loans, remember they can be either fixed or variable. If the rate is variable, you may well find you are quoted a lower rate when you first enquire about the loan. However, these rates are often discounted to attract new customers, and can often shoot up, especially if interest rates rise. A fixed rate may be quoted higher to start with. However, it helps you to budget better, since you know exactly what your repayments will be throughout the period of the secured personal loan.
Working out exactly how much you will pay is complicated and it's a good idea to consult a broker to help you compare one lender with another. A secured personal loan is a big commitment - you need to make sure you find the deal that's best for you.
About the Author
Sean Horton is a Director of Loans Connection who offer secured personal loans for any purpose
