Planning a big wedding, fancy a new car, want a new kitchen – or perhaps just to consolidate some existing debts, but don't want to pay through the nose? In other words you're looking for the cheapest possible deal on a loan.



It is a minefield out there – as there are numerous offers popping out at you every way you look. But everyone's circumstances are different, so an excellent way to decide on the best loan for you is to go to a loan broker.

The advantages of using a loan broker are that they aim to get you the best deal by:

• Offering a free service

• Having access to numerous financial products from numerous lenders

• Finding a specific product to suit your personal circumstances

• Keeping up to date with the latest products on the market

• Acting as a go-between with you and your lender

• Underwriting the loan from a suitable lender

• Quoting and agreeing terms that you understand

• Providing you with all the relevant paperwork from your lender

• Advising you on anything you don't understand

The broker understands that everyone who wants to borrow has a different set of circumstances. Because of this the rate you may be offered can differ dramatically and depends on:

1. Your personal circumstances

The amount a lender decides to offer you always depends on your personal circumstances. Don't assume that just because a colleague, friend, neighbour – or even your spouse, has been lent a lump sum at a certain interest rate, that you will be offered the same.

Personal circumstances include:

• Your monthly income

• Your partner's income (if applicable)

• Your household costs, including bills

• Any existing loans

• Other outgoings, such as pension contributions, maintenance payments

• The equity in your house (ie how much of the mortgage you have already paid off and the value the house has risen by)

• What you will be using the loan for. For example, a loan for home improvements could be seen as increasing the value of your home, so is an investment, whereas borrowing money for a holiday is not.

2. Your credit score

When applying for a loan you will have to answer questions, so that your lender can decide how reliable you are as a borrower. The questions include how much you want to borrow and for how long, what your income is etc.

Your answers will then be given a points score. If you have a high rating you are more likely to be offered the amount of money you need with a competitive interest rate. If your score is lower you may be offered less money, or perhaps a higher interest rate. Do note that all loan providers use this information differently – some will be more interested in your income and others in what you want to spend the money on.

3. Your credit rating

As well as being credit scored, your lender will look at your credit history by contacting a credit reference agency. Everyone in the UK has what is known as a credit rating. This is information kept on you by all financial institutions, such as banks, building societies, mortgage lenders, credit card companies and utilities companies, including telephone, gas and electricity suppliers. It gives your full credit history, so your lender will know if you have ever defaulted (not paid back the agreed amount) on a loan before.

Know your credit rating. There are three credit rating agencies in the UK, who hold information on you. Sometimes information logged can be incorrect, as you can be affected by the credit rating of someone who has previously lived at your address. To be sure that your details are correct send any one of the three companies a cheque for £2 and they should send you your information within seven days. They are:

1) Call credit plc - www.callcredit.co.uk

2) Equifax plc - www.econsumer.equifax.co.uk

3) Experian plc - www.uk.experian.com

If you do have any queries once you have received the information contact one of the agencies above, or ask your broker for advice.