Martin Lewis is the Money Saving Expert who often appears on screens to share his advice on how to save money. Speaking on This Morning today, Martin told viewers how they can get a cheap loan and which one is best for them. Martin revealed loan rates are near the all-time cheapest but also shared just how costly getting it wrong can be. He also explained where people can get tripped up when taking out a loan and what they must known before applying for one.
Who is eligible for a loan?
Although loans are cheap, Martin explained they are not for everyone and people should use a loans eligibility calculator to see if it’s right for them.
He said: “Using a loans eligibility calculator is the right starting point. You tell it your information and it shows you which loan you are most likely to be accepted for. It does that without impacting your credit worthiness – letting you home in before you apply.
“Yet the fact you can get a loan doesn’t mean you should. Some eligibility checkers include both personal loans and more unsavoury high interest loans, Martin’s Loans Eligibility Calculator, excludes high interest loans, otherwise you can end up in the sub-prime market without realising it.”
The Money Saving Expert revealed people must ensure they can afford repayments before taking out a loan.
“What’s really important to understand with loan acceptance is this is about far more than just credit history,” he said.
“A key part of loan acceptance is your income, can you afford to repay it? So if you’ve a good credit score, while a lender may accept you if you want to borrow £2,000, if your income isn’t enough it may reject you for £5,000.
“Therefore, if you can’t get cheap lending, it’s worth noting that often it means most lenders don’t think you can afford it. So rather than jumping on to a higher interest loan – that’s a good warning sign.”
How cheap are loans right now?
If getting a loan does seem like a good option, Martin listed to cheapest ones available at the moment.
Cheap loan rates
£1,000 – £1,999: Admiral is 13.2% rep APR
£2,000 – £2,999: Zopa is 12.9% rep APR and Admiral is 13.2% rep APR
£3,000 – £4,999: Admiral is 6.4% rep APR
£5,000 – £7,499: Zopa and Ratesetter is 3.3% rep APR and Admiral is 3.4% rep APR
£7,500 – £15,000 M&S Bank is 2.9% rep APR
Although these loans may seem cheap, he warned viewers these rates do not apply to everyone.
He said: “No. As you’ll see all loans are ‘representative APRs’, and that little word is important – it sadly means only 51% of people who apply will get the advertised rate. The rest can be charged more, and there’s no limit to how much more.”
Although loan rates are low, Martin warned they are not always the cheapest way to borrow money.
He revealed: “For smaller amounts a zero percent credit card will be cheaper. If what you’re borrowing for can be paid on a zero percent credit card, then get one, and as long as you clear it before the zero percent ends and don’t miss repayments there’s no cost.
“Even if you can’t pay on the card, there’s a way to get a special zero percent credit card loan.
“You do this via a few specialist cards that offer ‘money transfers’. These cards let you transfer cash from the credit card to your bank account for a small nominal fee, so then you owe the card at zero percent. These are likely to be the cheapest route for smaller loans.”
If a loan is the best option, Martin explained the best length of time this should be paid off.
“As in many things, with loans, length matters. The longer you take to repay, the more interest accrues,” he said.
“A 15 percent one-year loan costs far less interest than a 4 percent loan over 5 years. So only borrow for the length that you absolutely need to repay in. If you can reduce the term even by a year that’ll make a big difference to the interest you pay.”
Last week, Martin told viewers how they could get 50 percent off Tesco products.
He also shared the simple way to save £350 on energy bills.