One of the most important factors when looking for a loan is the interest rate, and you should pay close attention to this factor when you're out scouting a loan for your circumstances.

What makes a low interest rate so important?

Although the question may seem unimportant, many people don’t realise the amount of money they could be saving had they done their research on interest rates in the first place.
A lower interest rate could prove to save you a lot of money both on monthly payments and over the whole course of the repayment.

Take for example a loan of 5,000 pounds paid back over five years. Your interest rate is 12 per cent. You'll pay a monthly instalment of 111.22 pounds, and a total amount of 6,673.33 pounds.

The same loan with an interest rate of eight per cent means a monthly instalment of 101.38 pounds (a saving of 9.84 pounds per month), and a total of 6,082.92. That’s a saving of 590.41 pounds in total. Think of what you could do with that kind of money!

The example above should be enough proof of what difference an interest rate can make. Although the monthly saving is not much, the total saving can amount to quite a bit. In other words, if your loan is quite large, a lower interest rate could amount to a big saving.

How can you find the best loan deals, with good interest?

Numerous web sites offer tools to help you compare interest rates. However, keep in mind that not all loan companies advertise on these sites. A bit of digging around should reveal information that could get you a better deal on interest rates.