Employee Loans believes in providing an ethical and transparent financial service, where businesses and employees can feel at ease every step of the way.
We know financial terms aren’t always easy to understand, so we’ve decided to gather all the information you need to make an informed decision when it’s time to decide what type of financial product would suit you best.
On this page, you’ll get to know what low interest loans are and whether they can be the right finance solution for you.
Low Interest Loans Explained
A low interest loan is basically a loan product where the lender charges you low interest rates, in along with your monthly repayments. This means that the total amount you will pay for your credit will be lower than with a high interest rate product.
But first things first: to understand the pros and cons of low interest loans, you need to be clear on what interest rates are.
Loan Interest Rates Explained
An interest rate can be defined as the proportion of a loan that is charged as interest to the borrower.
The interest rate of a loan is one of the most important aspects to consider when taking out finance, as it is basically how much you will be charged for the loan.
The interest rate of a loan is calculated on a yearly basis and is set by the lender at the start of every finance agreement.
The rate you’ll pay depends on several factors, such as the lender’s policy, the borrower’s credit history and personal circumstances, and the state of the economy at the time of borrowing.
The official interest rate used for borrowing is the Annual Percentage Rate, commonly referred to as APR.
When a lender calculates the APR for your loan, they must include both the cost of the borrowing and any associated fees that may be included.
Positives of Low Interest Loans
– Low interest loans effectively reduce your monthly payments and the total cost of borrowing.
– Getting approved for a low interest loan can help you build a stronger credit file, as it will speak to your creditworthiness and encourage lenders to lend to you at lower rates in the future.
– By paying lower interest rates and reducing your credit costs, you’ll to be able to borrow more money and repay it over a shorter period of time.
Negatives of Low Interest Loans
– The advertised rate isn’t necessarily what you’ll end up paying. When a lender advertises a representative APR, it is a legal requirement that that percentage applies to at least 51% of their customers. This means that, depending on your personal circumstances, you may very well fall within the remaining 49%, so you should always confirm your APR directly with the lender.
– Low interest rates encourage borrowing and can increase debt levels, if you’re not careful. Paying less for credit doesn’t necessarily mean you should take out more finance. Make sure you only borrow what you need and can repay.
– If you’re not able to repay your loan, this will damage your credit file. If the loan you’re taking out is a secure one – meaning you’ve used an asset you own to secure the borrowed amount – your asset may be repossessed by the lender, if you’re unable to meet your repayments.
Before taking out a loan, it is important that you assess your personal circumstances and compare the different interest rates available to make sure you choose the right type of product for you.
Employee Loans offers a number of different finance options, suited to every employee’s circumstances. If you’d like to know more about our finance solutions, our team of experts will be happy to help.
We’re here to guide you!
Monday to Friday (9am to 6pm).
Telephone: 01202 688177
UK residents only. Calls may be monitored or recorded.