- Fixed Or Variable Rate?
- Fixed Rate vs Short-Term vs Long-Term
- Fixed Rate vs. Adjustable Rate
- Fixed vs. Floating Rate
- What Is The Best Type Of Personal Loan For You?
- Set A Budget
- Calculate Available Funds
- Determine How Long You'll Be Out Of Town
- The Importance of Monitoring Your Bank Account
- Cut Down On The Extras
- Check For Bonus Codes
- The Biggest Reduction
How to Calculate a Personal Loan Fixed Rate
You wake up one day and decide that you want to make some extra money on the side. Maybe you’ve recently gotten married or bought a house and want to start paying off your investment. Whatever your reasoning may be, you decide that you need some cash and decide to apply for a personal loan.
It’s important to note that these are usually unsecured loans, which means that you’re not giving the lender collateral in exchange for the money. This is why they’re often easier to obtain than a business loan. The downside is that you have to pay the loan back, plus interest. (more…)
Fixed Or Variable Rate?
Before you decide what type of loan to apply for, it’s important to know the difference between fixed and variable rate loans. This will largely determine which type of interest to expect. Here’s a breakdown of both.
A fixed rate loan is one where the interest is predetermined. This means that the lender generally knows the prime rate – which represents the base rate for loans – plus some additional fees and discounts that may be applicable at the time of your loan. Your best bet for this type of loan is to search for the best rate available and apply before the end of the month. If you’re looking for a quick loan, then a fixed rate loan may be the best option for you.
A variable rate loan, as the name would suggest, has an interest rate that changes based on the market. As long as you keep the loan under 20% of your income, you should have no trouble finding a lender willing to give you a variable rate loan. Your best move here is to simply apply for as many loans as possible and see which one (if any) offers the best rate. Once you find that sweet spot, you can lock in the rate and move forward without any worries.
Fixed Rate vs Short-Term vs Long-Term
The previous subsection should have laid out the difference between fixed and variable rate loans. Now, let’s dive into the three different types of interest you’ll likely encounter when taking out a personal loan. (more…)
Fixed rate loans often come with an initial period where the interest rate is fixed for a certain number of months. This is generally followed by one or two periods where the rate is variable. It’s important to remember that while the interest rate is usually fixed for a certain period of time, this is not always the case. Sometimes, your loan may be adjusted to an adjustable rate, or in rare instances, you’ll be given an interest-free loan.
Short-term loans have interest rates that are relatively high, considering the length of the loan. This is because the lender is generally looking to make money off of your loan; they’re not committed to giving you the best possible rate. They may also have various fees and penalties for early and late payments. Your best bet for this type of loan is to search for the best available rate and make the payment at the same time each month. If you miss a payment, they’ll often increase the rate by 1% or more.
Long-term loans are those that have an interest rate that remains relatively stable for a long period of time. This could be anywhere from 6 months to 5 years. While your best bet for this type of loan is to lock in the best rate possible, keep in mind that it may not be the most attractive option if you’re looking for a quick loan. Your best chance of getting a good long-term loan is by building up a good credit score. This way, you’ll have fewer problems when it comes time to renew or extend your loan.
Fixed Rate vs. Adjustable Rate
The previous two subsections gave you an idea of what type of interest you’ll encounter when taking out a loan. Now, let’s talk about one of the most common types of loan – the adjustable rate mortgage (ARM). An ARM is simply a type of mortgage where the interest rate is adjustable. This is generally based on a few factors, such as the current market interest rate, the type of loan (fixed or variable), and the length of the loan. The advantage of an ARM is that it allows you to spread out the payment on your mortgage over a period of time. Rather than making a large lump sum payment at the end of the month, you make smaller payments throughout the month. This can lower your monthly expenses, particularly if you have other bills and obligations to pay, such as utilities and groceries.
While an interest rate on an ARM may be adjustable, most financial institutions won’t change the interest rate on an already-completed loan. If you’ve already signed the papers, you may have to put up with a bit of a headache until the end of the month – when the loan adjustment comes due. Your best bet for this type of loan is to find a reputable lender who gives good customer service and has a history of meeting obligations.
Fixed vs. Floating Rate
Another important factor to consider when taking out a personal loan is the type of interest you’ll be paying. While most lenders will want you to pay interest, some may prefer to give you a loan with no interest or with a low fixed rate. One major difference between the two is that if the rate changes, you’ll have to refinance your loan or pay the additional amount in cash. This could be a good or bad scenario, depending on how you look at it. (more…)
If you want a low fixed rate, then you might be better off taking out a loan with no interest. However, you’ll have to make extra payments at the end of each month – otherwise, you might end up with more than just a headache if you miss a payment.
Floating rate loans are the same as fixed rate loans, but the interest rate is linked to an index or a benchmark. For example, many credit cards will have your interest rate tied to a certain benchmark, such as the prime rate or the London Interbank Offer Rate (LIBOR). If the rate changes, you’ll have to pay attention to see if you’re better off taking out a new loan or waiting until the end of the month to make a payment.
What Is The Best Type Of Personal Loan For You?
Ultimately, your decision to take out a personal loan or line of credit is a personal decision. You must decide what type of loan is best for your needs and circumstances. While building up a good credit score may be important to secure long-term loans, it’s probably not the number one consideration for someone looking for a quick loan. What type of loan do you need?
You have a dream vacation planned with your loved one. You’ve been wanting to do this for a long time and finally found the opportunity. You want to make sure you don’t blow the budget on luxurious items, so you’ve come up with a plan. You’ve decided to apply for a personal loan to cover the costs of the vacation. The catch? The bank you’ve chosen has a fixed rate of 14.99% APR on personal loans. This may seem like a lot, but you’re well within your rights as a responsible borrower. Still, it’s pretty high given the current economy. You don’t want to risk losing money, so you’re forced to find other options. Luckily, you’ll find a reputable lender which offers an easy loan application process, quick loan approval and, most importantly, a good rate that won’t ruin your vacation. Let’s look at how to calculate your personal loan fixed rate so you can have an idea of how expensive your vacation will be.
Set A Budget
The first step is to set a budget. You don’t want to go above and beyond your means, so you’ll need to find the absolute minimum you can spend on your dream vacation. In this case, you won’t be able to cover the costs with a credit card. You’ll need to find additional funds in some form or another. Setting a budget is crucial because it gives you some limits which you can’t go beyond. It may even inspire you to cut back on some of your regular expenses so you have more money left over for the vacation. This is especially important if you’re trying to maintain a high credit score so you can get more favorable interest rates on purchases in the future. This kind of score can be easily damaged by going over your credit limit, so it’s best to keep it below what you can afford. You can also use a budget to determine how much you can spend on travel insurance and how much you should spend on airfare to keep your travel costs down. Setting a budget doesn’t mean you have to be cheap – on the contrary, it can be a fun challenge to spend as little as possible while still getting the things you need. Your budget will help you figure out how much you can spend without going into debt or how much you can afford to spend without risking hurting your credit score.
Calculate Available Funds
The next step is to figure out how much money you have available for the vacation. This can be tricky, especially if you don’t have a lot of savings to fall back on. Many people find that paying back a loan proves to be much more difficult than going on a luxurious vacation. The key is to list all of your assets and liabilities. This is something you’re required to do in order to apply for a loan, so it’s important to know how to do it. Listed below are some examples of items you may want to include in your calculation:
- Home equity loan
- Rental Property
- Any Long Term Loans
When you add up all of these numbers, you’ll get a total sum. This is your available funds. This figure takes into account everything you can use to pay for the vacation. If you have a clear picture in mind of the kind of vacation you want to take, this step will be easy. If you’re not sure, it can be a bit overwhelming. This is why it’s a good idea to follow the steps of a reputable travel agent. They will know how to choose the perfect package for your needs.
Determine How Long You’ll Be Out Of Town
Once you’ve finalized your budget, you can move on to the next step which is to determine how long you’ll be out of town. This will depend on when you’re going and how long you’re going for. If you’re going someplace far from home, you’ll need to figure out how long it’ll take you to get back. Remember – if you’re going to be gone longer than you’re supposed to, you’ll have to pay extra for travel insurance. This is a simple enough rule to follow, but it’s one that can be easily overlooked. Calculating how long it’ll take you to get back home can be tricky. You don’t want to over estimate how long it’ll take you because then you’ll end up paying for extra nights at the hotel. The best way to figure this out is to look at your itinerary and make a note of how long everything will take. You can also ask the agent for help. She’ll know how long everything will take and can give you an estimate of how much it’ll cost. Don’t forget that while you’re out of state, you’ll need a car rental. When you add up all these expenses, it’s no secret that a luxury vacation can end up being quite expensive. Still, going on a luxury vacation isn’t something you need to feel guilty about. Just remember to budget responsibly and try not to spend too much money. Sometimes, it’s worth breaking a few rules to satisfy your desires.
It’s been an extremely stressful time for the UK recently as the pandemic put paid to many people’s planned travel adventures and many careers were put on hold. As a result of this many businesses were left with large outstanding loans, which is why we’re asked so often about ways to reduce our personal loan rates.
Thankfully, during this period, the UK government and lenders have been generous enough to adjust the rate on many personal loans, excluding mortgages. Let’s dive into how you can take advantage of these special circumstances and reduce the rate on your personal loan.
The Importance of Monitoring Your Bank Account
As mentioned, during this period many businesses and public bodies were left with large debts, which means there were many personal loans and mortgages offered at special rates. This is why it’s essential that you monitor your bank account closely or take a closer look at any suspicious activity; perhaps your bank has a feature that allows you to keep an eye on your accounts via text message or email. In addition to this it’s crucial that you register the details of your personal loan with the Financial Conduct Authority. This way you can check on the progress of your application at any time and ensure that the organisation processing your loan is handling it correctly. If you think that there is an error, you can escalate this and speak to a member of staff; however, it’s advisable not to wait until the end and hope that the lender rectifies the situation.
Cut Down On The Extras
It’s well-known that airlines, hotel chains, and other organisations can be very generous with their frequent flyer miles and bonuses. Not only does this mean that you can rack up lots of travel points and vouchers, it also means that you can rack up lots of interest on your credit card. Now is the perfect time to stop taking all of these freebies because, although the special rate may be great, you’re paying a high price for the additional perks.
If possible, avoid carrying a balance on your credit card and make minimum payments. It would be best if you paid off your entire loan each month, rather than carrying a balance. If you do carry a balance, then ensure that you’re paying down the principal as much as possible.
Check For Bonus Codes
Many lenders will graciously add a bonus code to your application form that entitles you to a percentage off your application. Without going too much into the details, let’s just say that these codes are often only available to new customers and can often be entered at checkout; if not, then you can try entering them upon application. It’s well worth checking for these codes as you may get an additional bonus each year that entitles you to a discounted rate. The key to successfully applying for a loan with a bonus code is to make sure that your details are correct upon submission. If you’ve entered your details correctly then you might get the discount, however, it’s also possible that you’ll just be denied the special rate because of an error on your part.
The Biggest Reduction
The biggest reduction that most individuals will be able to take advantage of comes from the Bank of England. Currently the bank is offering a 0% interest period on loans up to £500 and 1% on all other loans. If you meet the criteria then this is the perfect time to consolidate your debts and pay off your high-interest loans. In addition to this, the bank is also waiving application fees with this scheme. This is huge because it means that even those who can’t apply for a loan directly from the bank can take advantage of the 0% interest rate period.
If you’re interested in taking out a loan then it’s best to act quickly because the interest rate is set to increase after 30 June. However, if you’re looking to consolidate debt then now is the perfect time to act because with the reduced rate you may be able to accomplish your goal sooner than you think.