Personal Loans More Popular Than Higher Purchase

These days you can buy almost anything on Hire Purchase; cars, electrical equipment, furniture etc. The 'Buy Now, Pay Later' tag line hooks us into paying an often extortionate interest rate just to get some new goodies. But is HP really the best way to buy?

Experts are finding that, on the contrary, Hire Purchase deals are often up to 3% higher APR than the average personal loan over the same length of time. With this in mind, more consumers are turning to the loan companies and banks to borrow the money for their purchases.

This has several advantages. Firstly, you're more likely to get a lower interest rate with a personal loan than with a car dealership, for example. In addition, using money from a loan means you can pay in full for an item, thus owning it outright. Finally, loans are often easier to obtain if you have a less than perfect credit rating; you'll pay a higher APR but most retailers and dealerships will just flat refuse to give you something on finance if your credit score isn't up to scratch.

It's a good option for small businesses too; although banks offer business loans they can be very difficult to obtain, regardless of your credit score. If your business plan isn't solid, thorough or complete your business loan application stands a good chance of being refused. By taking out a personal loan to cover any start-up costs you eliminate this potential hurdle and, if your new business takes off well, it will pay for the loan itself.

Personal loans are even replacing credit cards in some consumer's eyes. Again, the APR tends to be lower on a loan than on a credit card, so it's good for larger purchases. In fact, for one-off purchases of up to £1000, some people even prefer taking out a payday loan than using their plastic. With a payday loan you get a lump sum of cash, usually between £100 and £1000, which goes into your bank account within 48 hours and gets repaid in full on your next payday. The downside with these types of loan is the high interest rate – usually £25 for every £100 borrowed. On a very small loan this isn't too crippling, but if you take out £800, you'll be paying back an extra £200 interest. But on the upside, there are no credit checks with a payday loan application, so those with bad credit scores have an option.

It goes without saying that it's safer to take out personal loans only if you know you can afford the repayments. If taking out payday loans, make sure you will have enough in your wages to cover the whole repayment. The penalties can be high for missing repayments on your loans.

Source: http://www.articlealley.com/article_652178_19.html