How Much do Guarantor Loans Cost?
It is worth investigating loans before you get one and a very important question to ask yourself is how much the loan will cost. It can actually be more complicated to find the answer than you might think as well so it could take some work. A guarantor loan will be similar to other loans in how you will need to look at the costs and work out how much the cost will be for you.
The interest rate tends to be the think that we are encouraged to focus on when we re comparing loan rates. If you go to a comparison website this will be what they use to compare the costs of different loans. It can be useful but it is worth making sure that you do not completely rely on it. Firstly, it is worth noting that interest can be fixed or variable. If it is fixed it means that the rate will not change for the duration of the loan or that it will be fixed for a certain period of time, If it is variable it can be changed during the course of the loan and this will often happen in response to base rate changes, but may tend to go up when the rates go up but not go down when they go down, unless it is a tracker. The lender can choose when to change rates and by how much so they could change on a random basis as well. If you are comparing rates then you can only compare them at the point in time when you are looking at them as it is hard to predict whether they will change. However, you could get a fixed rate if you want to protect yourself against rate changes and short-term loans do tend to have a fixed rate of interest anyway.
Admin fees and charges
As well as interest loans may also have admin fees and other one-off charges. These are sometimes added in to the interest rate or charged separately so it can be a bit confusing. If you contact the lender and ask their customer services department, they should be able to clarify this for you and explain how all of the charges work. It is worth doing this as it can often be difficult to find on a website or within the terms and conditions of a loan. If these costs are included in the interest rate it will be called the AER (annual equivalent rate) but if they are not it will be the APR (annual percentage rate). It can be easier just to find out how much in monetary terms you will have to repay in full and compare those figures.
Late repayment fees
If you are late to repay your loan, then you will be likely to be charged for this. This charge covers the increased admin fees for the lender, the cost to them of borrowing that money for longer to lend to you and other costs as well. These fees can therefore be pretty high and therefore it is worth knowing how much they will be. It could be that you will be charged a one-off fee or a fee per day until you pay what is owed or are charged higher interest. This will all change depending on the specific loan that you choose. It is therefore well worth checking it out. You may feel that it will not be relevant to you as you will repay on time and hopefully you will be able to do this. However, there is always a chance that you may not be able to for some reason and just knowing how much it will cost might help you to be more motivated to make sure that you do repay it on time. You might also want to compare lenders, which are otherwise very similar on other fees to see whether the cost of late repayment might be a factor in you deciding whether you want to use them or not.
Early repayment fees
Sometimes lenders will charge extra if you decide to repay your loan early. This is not something that everyone would want to do, but sometimes it can be good if you have some extra money, to repay the loan and therefore save money on the interest. However, some lenders will charge you if you want to do this and if you feel that it is something that you might want to do, then it can be worth checking it out. Some fees may just be small and worth paying, some may not exist and some may be high so it is good to find out what the lenders you are considering charge, so that you can decide which will be the best for you to go with.