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Personal finance: Net yourself a good loan

WITH interest rates so low, you can get a personal loan for as little as 10 per cent. But the headline rate is just the start of the story. There are other charges, including arrangement fees, and some lenders make you pay more interest if you don't take out payment protection insurance.

The internet is the most efficient way to find a competitive loan and to work out how much it will really cost (using an online repayment calculator). Some banks, such as the Halifax, even accept online applications via their web sites.

The AA (Automobile Association) may be best known for car loans, but the motoring organisation also offers loans for other purchases including holidays and home improvements. AA loans are not restricted to members, and its website provides clear online quotations and online applications, by way of a detailed on-line form. Currently the AA is quoting an APR of 12.9 per cent for a car loan. A pounds 9,000 loan to buy a pounds 12,000 car would cost pounds 462.63 a month, for two years, including payment protection cover.

Other lenders with online loan quotes include the Nationwide, Abbey National, Direct Line and egg. The Nationwide provides clear sample quotes via its loan calculator and borrowers can use an electronic form to request a full information pack. Direct Line has a reputation for good loan deals. Its rates compare well with other large lenders. Again, the Direct Line website has a loan calculator but, as with Abbey National, there is no online application form.

Egg, the new bank launched by the Prudential last year, has an excellent website. Visitors can use the site to add up their outgoings for other forms of credit, including plastic cards and store loans. Egg then calculates the savings that can be made by switching to one of its personal loans.

Loan deals change weekly as interest rates fluctuate and banks bring out new deals and special offers. The web is a good source of up-to-date information on the most competitive rates. The personal finance web site Moneyworld lists the best three loans, using data from MoneyFacts. MoneyExtra lists the 10 cheapest loans, based on information from The Exchange, the information service for financial advisers. Both list lenders based on interest rates - whether or not the bank itself is on the web.

Links: Abbey National, www.abbeynational.co.uk; Direct Line, www.directline.co.uk; egg, www.egg.co.uk; Halifax, www.halifax.co.uk; Moneyextra, www.moneyextra.co.uk; Moneyworld, www.moneyworld.co.uk; Nationwide, www.nationwide.co.uk; the AA, www.theaa.co.uk