Should you choose a loan based on its APR?
APR, or Annual Percentage Rate of charge, is an important factor. It is a calculation of interest and any automatic fees included. The actual APR will differ between lenders, even between products. However, all lenders must display their APR to you before you can sign a contract.
APR is a useful tool when comparing financial products but it is vital to look at every aspect of the loan before committing. Read and understand the terms before signing. Remember that it is important to think about the future. Failure to do so can have serious implications, should the worst happen.
What are the alternatives?
When weighing up your borrowing options, loans shouldn’t necessarily be your first port of call. Mainstream personal loans can range from a thousand to tens of thousands of pounds and they also have the advantage of having a fixed, monthly repayment. But if you are seeking a relatively small amount, you do have another option: credit cards could work out much cheaper than even the best loan rates.
Many credit card providers have introductory deals. Cards with 0% interest on purchases or balance transfers are a popular choice, and these offers can run for up to 40 months on the balance transfers. If the amount you need is within a credit card’s limit and you are confident you can pay it off before the end of the 0% you could save a lot of money in interest. Just make sure you remember when the introductory rate expires and pay of the balance before that date.
If you’re borrowing for a purchase that doesn’t accept credit cards then all is not lost. There is a specific type of credit card that could still work to your advantage. Money transfer cards allow you send your balance as cash into your bank account. Effectively, you have taken out a loan. You’ve just received a better rate than even the best rate bank loans.
How to choose between a loan and credit cards
You need to carefully consider your reason for borrowing. Should you require a loan for a small amount for a relatively short period then a credit card may be your best option. For larger amounts, you may need to look for the best low rate loans. Whichever option best suits you, make use of our powerful comparison service to find the best deals.