Unsecured Loans
Costs:
The costs of organizing a personal loan varies depending on:
- The lender selected
- The term of the loan
- The amount of the loan
- Protected or unprotected loan
- Administration fees
The lender selected
The greatest influence on the overall cost of an unsecured loan is the lender selected.
The price a lender charges is in turn influenced by the type of customers they are looking to attract.
Broadly speaking it is possible to identify three bands of personal loan rates based on the credit profile of a customer.
| Credit Profile | ||
|---|---|---|
| Very clean | Some arrears | Arrears and defaults |
| 6% - 9% | 9% - 16% | 16% + |
Protected v unprotected
The second major charge which influences the monthly cost of a loan is protection (this is accident, sickness or unemployment cover).
This cost is set in relation to the size of the loan. The higher the loan the greater the level of protection and the higher the overall cost.
Whilst each lender decides what they charge for their protection it is generally recognized that all lenders make a lot of profit from this loan add on.
At present the cost of a loan is often inflated by about 30% to finance this protection cost.
If you feel this protection cost is important to you it is usually better to buy a stand alone policy which is likely to cost a quarter of the amount charged by a loan provider.
Add ons
The final costs to be aware of are the so called add ons.
These are all one off fees.
The main ones you are likely to encounter are :
- Courier fee - This is a charge for getting the loan documents to you quickly. There is a benefit to this if you want a cheque quickly in say 48 hours of applying for a loan. If this is not important it is a fee which is not worth paying. Typical courier fees are £45.
- Arrangement fee - This is a charge for providing you with the loan. Most of the time you can argue against this charge. Companies make their profit from the interest rates they charge. Typical Arrangement fees are £50.
Use our FREE Credit Report to see if Remortgage is the right solution for you.
Unsecured loans: Main
Unsecured loans: Criteria
Unsecured loans: Considerations
Unsecured loans: Costs
Unsecured loans: Merits