Financial education article · General information
What will it cost in total?
Look at interest and fees together. Arrangement fees and other charges can make a comparison more complicated than it first appears. APR can help compare the annual cost of borrowing, but also check the total amount repayable in the specific offer. A representative APR is not necessarily the rate you will personally be offered.
How long will you be repaying it?
A smaller monthly payment can mean repayments continue for longer. Ask for a clear repayment schedule and check how the term affects the total cost. Where possible, compare options for the same amount over similar periods, rather than comparing monthly payments in isolation.
What happens if your circumstances change?
Consider what would happen if your income fell or you faced an unexpected bill. Read the consequences of a late or missed payment. An affordability calculation that only works when everything goes to plan provides an incomplete picture.
Do you understand the agreement?
Read the terms before accepting them and ask for clarification where something is unclear. Check who the lender is and what the agreement says about matters such as early repayment and changes in interest rates. Do not assume every borrowing product offers the same terms or protections.
Could another option work?
Compare borrowing with waiting, saving for the purchase or choosing a less expensive alternative. If you are already struggling with bills or repayments, seek free debt advice rather than treating more borrowing as the only answer. MoneyHelper’s Debt Advice Locator can help you find a suitable advice service. This article is general information, not a personal recommendation.
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