5 steps to getting a cheap unsecured loan at advertised rate.

An unsecured personal loan can be a cheap way of spreading the cost of a purchase or consolidating existing debts into one cheaper repayment over a shorter term.

Used wisely and with a little research before hand, a low rate personal loan can be a good way of making higher price items more affordable without creating an expensive long-term debt for yourself.

The real advantage of an unsecured loan is that it doesn't require you to risk your home and the interest rate is fixed from the start so you can budget for every payment without having to worry about interest rate hikes.

The only issue with unsecured loans is actually getting offered the rate that you applied for. The 'typical APR' (Annual Percentage Rate) that most lenders advertise is not what's offered to everyone who applies, many are accepted but will pay a higher APR rate.

The loan rate you are offered is dependant on two factors. One is your credit rating which all lenders will carry out as part of the application process. This is used by lenders to assess how much of a credit risk you are and whether they stand to get their money back. Very and make a profit.Very generally, if you have no history of arrears, defaults or CCJs and have a mortgage, you stand a good chance of being offered the typical APR.

The second factor is much harder to predict and simply comes down to the profile of customer the lender wants to attract. Banks and building societies know which type of customer is most profitable for them and, being in business to make money, they want to maximise profitable customers. For example, a lender may be targeting married couples with a clean credit history and existing mortgage of at least £150,000. If thats you you're in luck. The problem is that lenders don't make this data public, so its just a case of shopping around.

How to find the cheapest unsecured loans

There are a few simple precautions you should take before trying to compare unsecured loans and ensure you're comparing like with like.

Like any product, but particularly with over complicated financial services, it's important to know what you're buying. Anything else is folly and could cost you thousands. Once you're sure you understand exactly what your options are and which personal loan is right for your needs, then you can accurately compare like with like and discover the true bargains. Whether you use the internet, read books on personal loans or visit an adviser, know what you're dealing with first.

Every bank or loan company will do a credit check on you as part of the application process. As this is one of the crucial factors in assessing what loan rate they will offer you, it's vital to avoid any errors. So to increase your chances of success you need to see what the lender will see when they look at your credit report. You can buy a copy of your credit report for just £16.95 from Experian which is one of the major credit reference companies that lenders use themselves.

Lenders want to get their money back plus some profit so if they think you are over committed with debt or have access to too much, you're likely to considered a higher risk or be declined. So if you have any dormant credit cards, store cards or other forms of debt that you don't currently use, close them or consolidate down to one or two to reduce your access to borrowing.

Like any product, you'll realise the biggest savings and lowest loan rates from shopping around. Using the knowledge gained from step one, you should be able to quickly spot which unsecured loans are right for you and see through the haze to identify the best deals. Take the leg work out of shopping and use the internet to compare lots of deals, make a short list of the best three to take further.

When a lender looks at your credit report is will also show them any recent credit checks carried out on you. Multiple credit checks by different lenders can make you look desperate and hint that you have been rejected elsewhere. So if you make multiple loan applications be careful to point out that you only want a quote.