When comparing loans, ensure that you are comparing like with like. For example, make sure the rates you are quoted all include or all exclude repayment insurance, depending on your requirements.

Below is a list of points to consider before committing yourself. Some will be of importance to you, some will not. Again, it will depend on your circumstances and requirements.

• What is the annual percentage rate? Generally, the lower the APR, the better.



• Does the rate include repayment insurance, also known as accident, sickness and unemployment insurance? Terms vary considerably, so review them in detail.



• Check the total amount you will be expected to pay during the period of the loan, over and above the amount borrowed. This gives a good guide for comparison between loans.
  
  
• What the early redemption penalties are for paying off the loan early? Many lenders charge several months interest if you decide to pay off the loan early.



• Are there any additional features, such as free breakdown services for car buyers, or the option to skip one or more regular payments towards the loan.



• Is the loan cheaper for applications made over the Internet? Some lenders will charge a slightly lower rate because the admin costs are lower.



• Is an application or loan fee required? This fee can be up to 1 per cent of the total amount borrowed, which if added to the loan would also incur additional interest costs over the period of the loan.



• Do you have to pay your monthly payments by direct debit or standing order? Direct debit is an agreement with an organisation that you will pay a certain amount of money on a regular basis to that organisation. The amount can be varied by that organisation. You must be notified in advance of any change in deductions, but if your lender so decides, you may find yourself paying out more than you expected.
  
  A standing order, by contrast, commits you to pay a fixed regular amount to another organisation or person. The amount can be varied, but only by you.