Guarantors

If you're having difficulty getting a loan, a lender might be more willing if you can find someone to act as guarantor. This means that in the last resort the guarantor will pay back what you owe if you can't. But before going down this course you should consider whether it would be better to do without the loan. Be wary of acting as a guarantor yourself - you could be left out of pocket. And make sure that you cancel in writing your agreement to act as guarantor once the loan has been repaid otherwise you could find yourself liable for other loans subsequently taken out by the same borrower.

Are you entitled to any special concessions?

If, say, you're a student you might be able to get a loan from a High Street bank at a special low interest rate, simply because they're trying to attract new business and the student of today represents the executive of tomorrow. Some lenders offer special loans to doctors, new gradu-ates, members of motoring organisations, holders of existing credit cards or loans, and so on. Always check that these really are 'special' for you and that you can't get a better deal elsewhere. You might be offered prizes as an inducement to take out a loan. You should never let such inducements tempt you to take out one loan rather than another unless the loan is in any case the one best suited to your needs.

Comparing credit deals

The task of comparing different loan and credit deals is not simple though it's considerably easier now than it was before regulations under the Consumer Credit Act 1974 were introduced. The Act sets out rules concerning most aspects of the business of lending, including the information you are to be given before you take out a loan.

When does the Act apply?

The Consumer Credit Act applies to loans up to £45,000 made to individuals (which includes the self-employed) but not companies. Large parts of the rules apply only to 'regulated' loans - these are all loans falling within the scope of the Act except those which are specifically exempted from being regulated. The most important exemptions are most mortgages that you take out to buy your home, charge cards and most other very short-term loans connected to the purchase of specific goods. Unsecured loans up to £100 are exempted from large parts of the Consumer Credit Act, too, even if they count as regulated loans.


Read more about Credit Rating

Fixed Or Variable Interest?

With some loans, such as personal loans and some shop credit schemes ), the interest rate is fixed at the time you take out the loan. You know exactly how much you'll have to repay and when. This can help you plan your budgeting, but if interest rates fall you could be stuck with an expensive loan. Other loans, such as overdrafts and mortgages have a variable interest rate which yo-yos up and down with interest rates generally. Sometimes you can put off - at least for a while - increasing your payments in line with the increase in the interest rate but that does, of course, add to the amount of... see: Fixed Or Variable Interest?


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