Family life can often have special occasions or unexpected hiccups that won’t be covered by the monthly budget. In these cases, a personal loan can ease the burden – just make sure you do the research.
Here’s what you need to know about personal loans, thanks to ConsumerHelp.ie.
How do I apply for a loan?
When looking for a personal loan, your main sources are banks, building societies, finance companies and credit unions. In your application, you’ll request a specific amount to be repaid over a specific period of time. When your loan is approved, your provider will then work out your monthly repayment.
How are repayments made?
While credit unions are more flexible and may allow cash or cheque repayments, other financial institutions usually require you to pay back your loan by direct debit or by standing order.
How much interest will I be charged?
Your bank usually charges an annual percentage rate (APR) between 9% and 15% for loans above €2,500. For loans below €2,500, it may be best to opt for an overdraft or credit union loan, as by law, credit unions cannot charge more than 12.68% APR.
Are repayments flexible?
Repayments are more flexible if your interest rate is variable than if you choose a fixed-rate loan. This can be beneficial if your circumstances change and you want to pay your loan off early, reduce repayments or extend the term.
When you choose a loan, you should ask your lender whether you can pay more than your set monthly repayment or pay occasional lump sums off your loan. You should also check if you have to pay any additional costs if you pay off your loan early.
Do I need Payment Protection Insurance?
Payment Protection Insurance (PPI) ensures you are paid a specific amount of money to help you cover your monthly payments if you’re unable to work for specific reasons or are made redundant. When you take out a loan, you may be offered PPI, but do note that it is not compulsory.
Should I guarantee a loan for someone?
If someone asks you to guarantee a loan for them, it’s important to understand that you are entering into a contract with the bank. You need to think just as carefully about this as you would about taking a loan out for yourself.
