Interest rate 'not the only consideration when choosing a loan'

By Joel Stanier

When choosing a loan, most people will hope to get the lowest interest rate possible to help keep down their repayments. But interest is just one of many factors people should consider when looking for a loan, according to Defaqto.

The financial research company said that although the interest rate is important, borrowers may also want to consider whether getting a quote will leave a mark on their credit history. Currently only a limited number of lenders - including Nationwide, Ratesetter.com and Zopa.com - offer a full quote without leaving an imprint.

Whether the loan has a fixed or variable rate is another consideration. Almost all unsecured loans (94%) have a fixed interest rate, but borrowers should still check this with their lender before they agree a loan.

Defaqto added that 20% of loans charge an arrangement fee, with the most expensive currently standing at £200. And 81% carry some kind of early repayment charge, meaning borrowers may have to pay more if they want to pay everything back early.

A loans expert at Think Money said: "Most people will consider the interest rate the most important thing when choosing a loan, but there are other things to think about - and in some cases the other features could justify paying a bit more interest.

"It's well worth doing some proper research into exactly what each loan provider can offer before you borrow."

Image © iStockPhotos / YinYang

Tags: loans, interest rates, Defaqto, credit history, unsecured loans

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.