Loans: Flexible Loans
A flexible loan operates like a cross between a normal unsecured loan and an overdraft.
Flexible loans allow you to pay more or less than the expected monthly sum, can be secured or unsecured and, normally, there are no set-up fees.
Making regular overpayments or dropping in the odd lump sum can seriously reduce your interest bill and shorten the life of your loan, which is always a good thing. And you can also underpay or take repayment holidays when money's tight, normally without penalty although be warned that for each month you don't pay, the interest you owe will rack up in the background.
A further benefit is that you aren't penalised for repaying your loan early which, considering 70% of loans are repaid early, is no bad thing.
Some lenders offer loans that are so flexible - not to say, laid back! - that they'll give you a fixed borrowing limit and you can borrow against it any time you like. If you don't borrow, you don't pay anything and if you do borrow some or all of your fixed limit, then, within reason, you can choose what percentage of the loan to pay back each month.
In addition, once you have made a repayment, this money becomes available for you to borrow again so it's essentially a continuous loan on which, of course, you will pay an ongoing amount of interest. In other words, it's a flexible loan that works just like a credit card!
Next article: Student and Graduate Loans
Published on November 17, 2006
