UK residents can be certain that when they conduct a search about the different loan rates offered by UK loan agencies, the information provided is roughly accurate. These agencies are required to disclose their rates and the APR based on a law passed in the UK in 2005.
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This law makes it necessary for the lenders to provide the exact cost of all fees and rate amount charged as well as advertise their typical APR. APR was introduced in the UK under the Consumer Credit Act 1974, to ensure comparability of loans and is required to be published for all regulated loans. The APR must be more prominent than any other rate or charge.
Rates
Secured loans can be obtained on two kinds of rates :
- Fixed rate secured loans
- Variable rate secured loans
Fixed rate secured loans are loans secured against the value of the property where the interest rate charged by the lender is fixed for the entire loan term. By fixing the rate for a set period of time, borrowers can avoid the uncertainty of possible changes to their monthly payments that may arise in the UK's base of rate borrowing. This type of loan option is offered to consumers who have a good credit score. Having a good credit score will prove your ability to make your loan repayments and will make lenders eager to approve your application. A fixed rate secured loan also attracts a higher interest rate. The time period for this type of loan is short term, limited to 2-5 years. The fixed rate will help you maintain a fixed monthly budget.
Variable rate secured loans allow you to take advantage of any interest rate drops during the term. This rate may be based on the prime rate. The disadvantages of variable rate secured loans is that your repayment will rise if the base rate goes up before the end of the loan term and this will mean a longer time to repay the loan or increased payments. Something to watch out for with variable rates is that the lender will calculate the changes in the index; this means the lender picks a rate from the previous three months and applies that rate. The lender can pick the highest rate from previous months to calculate the base rate which may prove difficult for you in maintaining a fixed budget.
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