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Personal Loans- Things to watch out for

Personal Loans - Things to watch out for

Whether it's unsecured personal loans or secured personal loans, there are a few little things to be watch out for when you are considering a personal loan. Here's the Moneyfacts.co.uk guide.

Fees

Make sure you understand all the fees involved with your loan.

• Arrangement or set up fees are charged by some lenders right up front. For secured loans, these can be pretty hefty. 
• Early repayment fees may also be payable particularly in the early years. If there's a possibility that may be able to pay the loan off early it's a good idea to understand these up front or take a loan which doesn't charge these fees. 
• Administration fees will be charged in the event of missed payments, so make sure you've always got enough in your current account to meet the monthly direct debit.

Monthly Repayment

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• You need to repay the loan each month. With secured loans, you'll also have a mortgage to pay so make sure you can afford them both.

Payment Protection Insurance

• Payment Protection Insurance (PPI) is designed to make sure you can make your loan repayments if you can't work due to illness, accident or unemployment. PPI can be a valuable purchase if you buy the right policy. 
• PPI is optional and you should shop around if you intend to take this insurance out. The policy your lender offers you might not be the best value, or the best quality of cover. 
• Most PPI policies bought from the lender are paid for by a lump sum premium which is added to your loan. So you pay interest on the premium and may not get a full refund of the premium if you repay early. If you have to get this type of policy, make sure it allows for a ‘pro-rata' refund so you only pay for the cover you have. Better still, buy it separately so you don't have to pay interest on the premium. 
• Don't buy the PPI the lender offers you. It can be a valuable insurance to have, so go to an independent broker who can get you a better product which is suitable for your needs.