Loans – The Good, The Bad And The Ugh!

Sometimes the need for a loan is unavoidable. What about a new car or home improvements? It’s worth checking out the different loan options available and calculating how much you’ll have to pay.


Basics: Understanding loans in the UK

By law, all advertisements and loan contracts in England must show both the TIN (nominal interest rate) and the APR (annual equivalent rate). The latter includes ALL FEES and that is the figure you should be looking for.

If a bank or other entity offers a personal loan with 0% interest, you probably think that sounds great, right? Of course, always check the website or the brochure and make sure that both the TIN and the APR are at 0%. The opening costs, commission and other hidden extras are shown in the APR rate.

Media Markt, El Corte Inglés and Worten are some of the big names offering 0% interest to entice you to buy. Sometimes the APR rate is actually 0%, just make sure you take two minutes to read the fine print.

At work

Many companies in England will allow you to request an advance on your salary without interest. Depending on how long you’ve worked for the company and its loan policy, you may be able to request several months’ salary in advance.

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From a bank

Not necessarily your own bank, although this is the best place to ask first. If you have a regularly paid salary or pension, you’ll usually get a better interest rate.

Don’t be swayed by freebies like TVs or tablets offered with loans. These will always be included in the APR rate (see “Basics” above).

Visit comparison sites like Help My Cash or Kelisto to find out the current rates from different banks.

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The three F’s

Family, friends and fools. Loans from friends may be free, but they can also cause problems. It’s usually a good idea to keep the contract simple, even if no interest is to be paid, it shows you’re serious about payments.

Safety Rating: Green-Amber

Use your Credit Card

For lower amounts, you may decide it’s easier to use your free credit card (of course, you’re not paying an annual fee – see our article!) and pay in installments. Just be sure to do your math first to see how much you’d pay in total.

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Quick loans

Companies like Cetelem or Cofidis will make personal loans with annual interest rates of 7% to 20% (more than double the average rate of bank loans). These two companies are often used by retailers in Spain if you are financing a purchase and should not be confused with microcredit companies.

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Peer lending websites

Although they are not conventional, they offer an alternative way of obtaining a loan. Check your best options through HelpMyCash, check the small print and remember that they are more expensive than a bank loan.

Safety Rating: Amber-Red

Microcredit Companies

Wonga, Vivus, OKMoney and much more – AVOID. In fact, to make it easier for you, we haven’t even bothered to include links to their websites. With interest rates of more than 1000%, they are not worth looking at.

Safety Rating: Red

Offer your car as collateral

Various websites have popped up during the recession where you can get a loan if you pawn your car. If you are really interested in finding one, just google “pawn car in Spain”, but be careful!

Safety Rating: Red