Finding And Securing Fixed Rate Personal Loans

Whether your home is in desperate need of a renovation or you want to consolidate your existing debts into a single payment, personal loans can offer you a simple way to do so. However, you’d be forgiven for getting a little lost with all of the terminology. From fixed and variable rates to APR and repayment terms, knowing what’s best for you can seem like a daunting experience.

Fixed rate loans are one of the more popular forms in the world of credit and finance, offering predictable and budgeting-friendly repayment amounts that you can more securely work your financial life around. But are they suitable for everyone? We’re taking a look at what fixed rate loans are, how to find and compare online loans and ultimately, how to secure the best fixed rate personal loans.

What Is A Fixed Rate Personal Loan?

A fixed rate personal loan is precisely what the name suggests – a personal loan that has a fixed rate throughout its entire duration. You’ll pay the same level of interest throughout the loan term, meaning that it’ll never vary even as the market’s interest rates do. This can help give you peace of mind that your repayments will stay the same throughout the entire duration so you can more accurate budget and evaluate your outgoing costs on a month-by-month basis.

You can be confident in the fact that the lender won’t suddenly bump up your monthly interest rates or APR, even as the market changes, however, you should note that this includes both drops, and rises in the average interest rates. In other words, where variable interest loans will help you take advantage of lower rates, a fixed rate loan will protect you from occurrences where interest rates soar.

What Is APR?

When you apply for a loan, the interest rates will be given to you through another rate, called ‘APR’. Known in full as Annual Percentage Rate, this term refers to the official rates you will be charged to determine the cost of borrowing from any one lender. The rate will include standard interest rates, as well as any additional payments you are obligated to cover.

Not all additional fees will be included in your APR, however. Things like payment protection won’t always be taken into account and in cases where they are, can make the APR appear higher than with a competitor. For this reason, you need to look into the full terms and conditions to save any unexpected and less-than-welcome surprises along the way.

A calculator and Euros

If you are given a fixed rate APR, this means that the percentage given is the one that your loan will be fixed with for its duration. It will not fluctuate, and you can guarantee that the percentage agreed upon when applying will be the total you’ll repay over time.

In general, APR is calculated using the following:

  • The interest rate
  • When it’s charged (daily, weekly, monthly, yearly)
  • Initial Fees (e.g. fees for signing) 
  • Compulsory charges which are required as a condition of taking out the loan

While lenders will offer an advertised level of APR, this isn’t guaranteed. They only have a legal obligation to offer this rate to 51% of their customers, after which these rates can vary depending on your current financial situation. If your credit score is poor, or you have missed repayments previously, then your APR may be higher than the advertised rate.

Fixed Rate Vs. Variable Loans

While fixed rate loans offer security in the amount you’ll be paying for the duration of the loan, variable loans still have their benefits for those who choose them. The right loan type for you will ultimately depend on your current financial situation, how strict your budget is and your personal preference. Variable loans will have a fluctuating interest rate that ultimately depends on the current state in the financial market at any one time.

Stock chart with stacked coins

With a variable rate loan, interest rates can go up and down from month to month, which will change your monthly payment each month. Under this logic, fixed rates are the more stable option, but it’s when the market’s interest rates go down that variable rate loans really come into their own. If the market is having a particularly good spell, these loan types can be the more attractive option, but you need to be prepared to handle things if the interest rates go up again at any point.

If you’re planning to pay off the debt quickly and interest rates are low at the time, a variable rate loan could be the more beneficial choice. It is important to note, however, that sometimes your credit status and score can influence the type of rate that you receive overall.

How Can I Find The Best Rates?

As mentioned before, your current credit state could have an effect on the interest rates that you receive. You could receive a much higher rate than that which is advertised initially and for this reason, you’ll need to take time to compare the loans available on the market at the time. The higher the interest, the more you’ll pay back overall and so taking out the time to make a quick comparison could potentially save you hundreds.

You can compare lenders manually if you so choose but using a broker can often speed up the process and prevent you from having to fill in more than one application form. With most brokers, you’ll be able to fill out one form, and the details will be applied to various lenders to provide you with a provisional answer.

Alternatively, changing the loan term can change your likelihood of acceptance. While you may want a longer-term in which to repay the loan, some lenders may be more willing to accept your application on a shorter-term if they deem you more of a risk. Alternatively, they may request a longer-term for repayments if they believe that shorter terms will mean that you can’t afford the repayments.

A credit report concept

How Do I Guarantee The Best Rates?

If you really want to guarantee yourself the best rates on a loan, you’ll need to ensure you are flexible with your loan amounts and repayments and that your credit score is in a healthy condition. While this might not be immediately possible, those that do have the opportunity to improve their credit score first should do so. You can improve your credit score by:

Checking The Details

First thing’s first, you need to make sure that the details on your credit report are as accurate as they can be. This means pulling three different credit scores from three different places – Experian, Equifax and TransUnion. Lenders can pull your credit report from either, so it’s best to check all three to ensure that details aren’t incorrect on either. This can be something as simple as a spelling mistake on your address or where your credit accounts aren’t being reported correctly or in full. There may be cases where you made a payment on time and it is being reported as late, which are also available for dispute to mend your credit report.

You should also check to ensure that only points from the past six years are being reported, as this is the limit for which a credit agency can keep certain details and data about your credit history. The only case where this would be excepted is where a court judgement has ruled that bankruptcy should be listed for more than the six years.

Work Out What You Need To Improve

Once you’ve got your credit reports and amended any issues, you can start to work out what areas need to be improved first. Some errors can be to blame for a poor credit score but if this isn’t the case, where are you going wrong? Well, it’s suggested that the most common reasons for a poor credit score come down to issues in:

  • Your payment history
  • The amount of debt you have
  • The age of the accounts listed 
  • The mix of accounts you have
  • Your history of credit applications

In many cases, lenders like to see that you can handle different credit and loan forms, have a low debt-to-income ratio and that your accounts have enough history to be studied. If you’re new to credit and borrowing, your credit score may be low simply because there isn’t enough information to go off. In these situations, you may need to take time to improve the score simply by taking out credit on a phone or another asset, as these are the most likely to be accepted.

Fix Any Late Payments

This one is going to take a little longer but will help set you back on a healthier path with your credit score. Closing an account won’t make any issues disappear, so you’ll need to start manually working to improve any late payment faults by getting back on track. Det up payment alerts or even a direct debit to ensure that all loans are paid on time and that your credit card is receiving regular payments to ensure that these can’t cause issues in the long term. In a lot of cases, lenders will be willing to move the payment dates, so you can try and bring them all onto one or two days in a month to ensure nothing is missed.

Credit companies can also be forgiving in cases where the late repayment has a valid excuse behind it and your repayments are back on track. Contacting the lender to discuss the late payment and have this taken off of your credit report can help improve the score, though you’ll likely need a good track record of paying off these debts. For the most part, a credit report agency won’t consider a repayment as being late until it is past 31 days, but the lender might. If this is the case, the lender might still be willing to wipe the late repayment mark in return for the payment made or another solution decided.

Shaking hands at a business meeting

This isn’t guaranteed, however, so it’s best to speak to your lender to discuss the likelihood and any criteria they may have for changing and adjusting repayment plans.

Am I Eligible For Fixed Rate Personal Loans?

Your eligibility for fixed rate personal loans will ultimately depend on whether you’re eligible for a loan in general. Different lenders will have different criteria depending on who they are and aren’t willing to lend to, but rest assured that they will follow FCA guidelines regardless. This ensures safety in borrowing and that all lenders that are approved by the FCA will be responsible in their practices.

Under these guidelines, lenders can only lend to people who:

  • Pass affordability checks
  • Are over the age of 18
  • Are official and legal residents of the UK 
  • Are in full-time employment, or in some cases, part-time or self-employment where income is sufficient. 

These aren’t the only guidelines that lenders have to follow, but they do outline the base criteria for any person applying for a loan. Beyond this, each lender is required to run full checks as to affordability and credit reports to ensure that the borrower won’t, as far as the lender is aware, run into any financial trouble as a result of taking out the loan. They will look at credit history, current income and expenses, the amount of debt you currently owe compared to your income, your employment status and the loan amount and repayment period that you’re requesting.

Finding the best rates for a fixed rate personal loan ultimately comes down to first, determining whether a fixed rate is right for you and second, how healthy your credit score is overall. While some lenders won’t just look at your credit score, consumers with a poor credit score could face higher interest rates overall and therefore, a more expensive loan. Hopefully, this guide has given you an insight into finding and securing the best rates for your next loan – borrow sensibly!

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