Rate, APR and Total Cost of Borrowing
The annual percentage rate (APR) is the most standardised way to compare the cost of borrowing across lenders, as it includes the interest rate and certain compulsory fees. However, APR is most useful for comparing products with the same term — a 10% APR over 10 years is a very different total cost to a 10% APR over 25 years. Always ask for the total amount repayable over the full proposed term when comparing lenders.
Arrangement fees vary significantly between lenders. Some charge a flat fee (for example, £995); others charge a percentage of the loan (for example, 2–3%). A percentage fee on a large loan can add thousands of pounds to the cost, while a flat fee on a small loan may be disproportionately expensive. Make sure you understand whether the fee is added to the loan (incurring interest over the full term) or paid upfront.
Early repayment charges (ERCs) are an often-overlooked cost factor. If you might repay or refinance the loan within the first few years, a lender with high ERCs could leave you paying a substantial penalty. Compare ERCs alongside rates and fees — particularly if your financial circumstances might change, making early repayment desirable.
Broker fees also affect the total cost. Some brokers charge a procuration fee paid by the lender (meaning no direct cost to the borrower); others charge a broker fee of 5–8% of the loan amount. Always confirm the total cost including all fees — lender and broker — before comparing products from different sources.
Criteria Flexibility: What Each Lender Will and Won't Accept
Criteria is arguably more important than rate, because a lender who does not accept your application is not a useful comparison point regardless of how competitive their rate is. Key criteria dimensions to compare include: credit profile acceptance (which adverse events are acceptable, how old they must be, whether they must be satisfied); income types (employed, self-employed, rental, pension, benefits); and loan purpose (debt consolidation, home improvement, business, personal).
Age limits matter significantly. Lenders set both a minimum age (usually 18 or 21) and a maximum age at the end of the loan term. Some lenders cap the borrower's age at term end at 70 or 75; others extend to 80, 85, or beyond. For older borrowers or those looking for longer loan terms, age limits can be the decisive criteria factor. Together Money and Spring Finance are known for generous age limits; many mainstream lenders cap at 70 or 75.
Property type acceptance varies considerably. Most lenders accept standard residential freehold and leasehold properties in good condition. Non-standard construction (concrete panels, timber frame, steel frame), properties with short leases, flats in large blocks, properties above commercial premises, and rural properties with significant land can all present criteria challenges. Always confirm the lender's property criteria before applying if your property is in any way non-standard.
