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When applying for an unsecured loan, the most obvious thing to do would be to choose the one with the lowest typical APR. STOP! The key word in the phrase 'Typical APR' is 'typical' i.e. the rate you would get in ideal circumstances. The loan companies work out your APR by considering certain pieces of information such as the amount you wish to borrow, your past credit history and the length over which you will be making the repayments.
If, for example, the loan company offers loans between £1000 and £13000, a lower amount is less likely to get the typical APR. There is usually a midway figure that will be the least you have to borrow to qualify for the lower APR, say £7500 in our example above. Of course, on top of this a better credit rating will involve less risk for the company and will so also mean a smaller APR.
When you are looking for a loan you are likely to have a set amount in mind that you want to borrow e.g. £7250. Bearing the above in mind, it might be in your best interests to take out a larger loan of £7500 to qualify for the smaller APR. Then you could either repay the money straight back, if the terms and conditions allow you to, or keep it in a savings account to be paid back at a later date.
Why not try our 'compare personal loans' service.
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