Good news for borrowers as personal loan rates fall

Esther James, personal finance analyst at Moneyfacts.co.uk, comments: “For most of 2007 we reported rising loan rates, with the demise of sub six percent personal loans and the market finally settling at the end of the year with the best deals around 6.5% to 7%. But as 2008 starts, there is good news for borrowers as rates begin to fall.

“Only 14 days into January, and five lenders have reduced rates by as much as 3%. With NatWest and Royal Bank of Scotland implementing a cut for existing customer loans just before the New Year.

“It’s the season of debt consolidation, so perhaps these lenders are looking to maximise their opportunities within this limited window. The drop could be a seasonal fluctuation or a limited marketing drive rather than the start of a more widespread trend, but only time will tell.

“Loan rates don’t typically move in line with base rate, and are certainly not proportional to the 0.25% bank base rate change.

“Shopping around for a loan is a must when refinancing or using the funds to buy something. Get it wrong and you could be throwing your money away on unnecessary interest, or face having to repay your loan over a longer period.

“Moneyfacts.co.uk top 5 tips when looking for a personal loan:

1. Check out the interest rate – but beware that in 89% of cases the rates quoted are typical. So if accepted, you might be offered a higher or lower rate than that advertised, depending on your credit status.

2. Avoid the lender’s own payment protection insurance; buying from an independent provider such as paymentcare.co.uk will save you a packet.

3. Check how the rates are tiered. Sometimes borrowing a little more could save you interest if the rate is substantially lower.

4. Be aware that payment holidays will increase the total interest bill you repay, so only take them if you really need to.

5. Choose a term that suits the item you are financing and which is truly affordable. For example there is nothing worse than repaying a loan for a car, which was sent to the scrap yard two years before. And with repayments fixed, if your circumstances change and you need to change your monthly repayment, this may mean completing a new loan agreement at the rate offered at that time and you will often incur a redemption charge.”

Source:http://www.easier.com/view/Finance/Loans/Personal_Loans/article-156631.html