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A Personal loan isn't for life or just for Christmas!

With Christmas only weeks away, you may be planning on splashing out on presents and the festivities. Whatever your purchase, remember that although a personal loan can be a useful way of funding such spending, they are a big responsibility - so you need to make sure you get the best personal loan to suit your circumstances and that you can afford to pay it back.

If you are sure you can pay back the personal loan, there are a few things you need to consider before signing on the dotted line.

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The majority of personal loan rates you see will be a typical rate. That means that you may not get the actual personal loan rate advertised as the personal loan provider may base the personal loan rate on your individual circumstances. That means if you're deemed to be a higher risk customer, the personal loan rate will be higher than the typical rate advertised.

Some personal loans come with flexible features, such as payment holidays for the first three months. But nothing in life is free, and repayment holidays mean you pay more interest overall as interest is still charged during this repayment holiday.

Also, if you suddenly come into some money or want to pay back the rest of your personal loan early, you may be hit with an early repayment charge, called a redemption penalty. This is pretty standard across the personal loan industry.

The dangers of Payment Protection Insurance ("PPI")

Once you've found the personal loan for you and are ready to apply, every personal loan provider will check your income and credit score before granting you the personal loan. If you are successful, you will most likely be offered payment protection insurance or PPI, which essentially covers you if you find you can't pay back the loan. However, PPI is very expensive and inflexible and not always necessary.

• Loan providers are so keen for you to take PPI, they may offer you gimmicks such as "money back", which would give you a percentage of your personal loan back if you don't claim on PPI.
• Remember, you are not obliged to take PPI and it adds to the overall cost of the personal loan.
• If you do want to take out PPI then make sure you check all the small print to ensure it does actually cover you for your individual circumstances.

What's the best personal loan deal?

For £5,000 over three years, the best personal loan currently available without insurance is from the Co-operative Bank's Your Personal Loan offering 6.7% For £10,000 over five years, Sainsbury's Bank is offering a rate of 6.5%.

If you opted to take PPI with the Sainsbury's Bank personal loan, borrowing £10,000 over five years your fixed monthly repayments would be £253.39, compared to £195.01 without insurance. That's an extra £58.38 per month, or an extra £3,502.80 over the 5-year lifetime of the personal loan. So PPI is very expensive!

If you're planning on splashing out over Christmas, make sure you do your homework and search for the best personal loan to match your individual needs and don't fall for the PPI sales patter!

Personal Loan Best Buys - £5,000 over three years

Personal Loan Best Buys - £10,000 over five years