Secured Loans information resource

When you search for a loan online, you will find results that give you the average interest rate for each lender. There are even specialised comparison websites which aim to provide you with the best deals to suit your circumstances. However, while these can be useful at times, consumers are being urged not to take the interest rates shown at face value. The actual loan rate that you receive will vary depending upon a number of factors.

In some cases if your circumstances change and the way in which you pay differs from when you took the loan out, you will be charged quite high fees by the lender. This is particularly the case with secured loans or payday loans.

As most secured loans come with variable interest rates, the ones that offer a fixed rate are typically the worst for fees. They know that if you take out a 25 year term loan to repay a sum of £10,000, they will also receive regular interest for that entire period. Therefore if you want to start paying more than the agreed monthly sum to get out of debt quicker, the lender is likely to charge early redemption penalties.

These early redemption penalties can be charged for a number of reasons. It could be that you would like to pay the entire loan off early. Or maybe you would just like to increase your monthly repayments? Either way you could end up having to pay a lot of additional fees that have been hidden in the small print.

These high fees are usually only given for newer loans. The longer that you have had the loan, the less likely you are to receive high early redemption fees. This is because the lender will already have accumulated quite a lot of interest from you.

The government have made these early redemption fees slightly more affordable by placing a cap on loans at least £25,000 in value. Now loan companies can only charge up to eight weeks interest of the loan amount if the consumer wants to pay it off early.

One company that does not currently charge any hidden early repayment fees is Zopa. Back in November 2009, the co founder of the company, Giles Andrews, claimed:

“Zopa has never charged an early repayment fee because we believe it is a nasty, hidden cost designed to protect the provider’s profit margins and discourage people from doing the right thing financially.”

Unfortunately not many lenders think this way. Therefore the advice to consumers is to thoroughly read through the small print of every loan that they are considering. Look at all of the hidden fees that could apply to the loan. Also remember that your individual circumstances will affect the loan rate that you receive. The rate that is advertised is very rarely the rate that you end up with. Early redemption fees are the main potential additional costs that you could end up paying. As long as you are aware of these you can then decide which loan offer is best suited to you.