Fixed rate personal loans extra repayments
What are fixed rate personal loans extra repayments?
Before taking out a personal loan you should conduct some thorough research into what is available in the market; the classic "look before you leap" strategy. The personal loan market can be quite baffling for would-be borrowers, especially if you are entering it for the first time, so not only should you make plenty of comparisons between what's on offer, but also it's a good idea to take some professional advice about what suits your circumstances. Fixed rate personal loans extra repayments are one way to repay that could give you a number of advantages. With this type of loan your interest rate for repayments would be fixed for an agreed period of time but you would also be able to make additional repayments to the loan when you have some extra money available.
Why do people use fixed rate personal loans extra repayments?
During your research you'll find there are two ways of paying interest on your personal loan, fixed rate and variable rate. With a variable rate your interest could go up or down depending on the movement of the money markets, so repayments could increase or decrease.
A fixed rate personal loan means you and your lender agree on a specific interest rate that is fixed, usually over a number of years but sometimes dependant on the amount of the loan. It means that you know exactly what you will be paying back each month and are protected from the vagaries of the markets, though if interest rates go down your repayments will remain the same.
Having a fixed rate personal loan where you make extra repayments is useful for people who either come into some money through inheritance or by way of an annual bonus and want to be able to pay down some more of the loan. By reducing the loan size you will also reduce the amount of interest paid over the full term of the loan.
What are the main features of fixed rate personal loan extra repayments?
This type of loan gives you added flexibility in terms of paying off your loan. When your loan is fixed it gives you more control over your monthly budget because you know exactly what you will be paying. If you agree to a set rate for a number of years it will help you with your overall financial planning. The ability to make extra repayments when you are in a position to do so will also assist your finances by reducing the amount of the principal sum borrowed so that by the end of the agreement term you will have paid less interest.
What are the pros and cons of fixed rate personal loans extra repayments?
Budgetary control and easier financial planning together with saving money are benefits of this sort of loan. You should make sure your lender doesn't have any hidden charges or high additional fees that apply to fixed rate personal loans extra repayments.
You also need to ensure that if you have a person standing as your guarantor they understand the potential risks involved should you default on your debt and that, if the worst came to the worst, they would be able to continue paying it off. On the positive side, by having a fixed rate personal loans extra repayments personal loan you may be offered a more attractive overall interest rate.