Despite what you might think, getting a personal loan doesnt have to be a difficult process. Whilst its true that you have hundreds of options open to you and an often bewildering number of choices to make before you put in a formal application, its quite easy to make sure you make the right decision at the right time and that you also save yourself time and money into the process. There are basically three steps you need to take before you choose the loan thats right for you:

Step One Know what you want

The first thing you need to do is to decide which kind of personal loan will suit you and your circumstances best. For example, if youre a homeowner then you can look at taking out either a secured loan or an unsecured one depending on your preference. If you dont own your own home then you will probably be limited to an unsecured loan.

Secured loans are given to property owners and will use your home as a guarantee against the money you borrow. So, if you stop making loan repayments, your lender can use your property to recover their loan(s). Because youll be using a guarantee youll generally be given better (i.e. lower) rates of interest on the money you borrow. Unsecured loans, on the other hand, dont need you to be a property owner as there is no guarantee involved. This lack of guarantee does make the loan slightly more expensive and may also give you restrictions on how much you can actually borrow although this does vary from lender to lender.

If youre not a property owner then this kind of unsecured loan will generally be the only option open to you but its worth remembering that many homeowners now prefer an unsecured loan to a secured one in any case as they dont want to risk losing their property if things go wrong down the line.

Another choice youll need to make here is whether to take out a loan with a fixed or a variable interest rate. If you are given a fixed rate then your monthly repayments will stay the same all of the time. A variable rate, however, may see your repayments change if underlying interest rates change at any time.

Step Two Stick to what you can afford

Its quite easy to raise finance in most cases and its very tempting to borrow more than you actually need simply because you can. Its really important therefore that you work out exactly how much you need to borrow and how much you can afford to repay on any loan. The key thing to remember here is that it not a lenders job to work out how much you can afford its your job! You cant blame your lender later if they let you borrow more than you can afford to repay.

The easiest way to do this is to look at your monthly outgoings and to work out how much cash you have spare once youve met your existing financial obligations and spending for the month. This sum is basically what you can afford to pay as a loan repayment every month. It is, however, worth noting that you should always leave a bit of cash spare for emergencies so you shouldnt commit all of your spare cash for loan repayments but should also leave a bit to cover you along the way.

You can then check if your spare cash and loan amount needs marry up OK by looking at an online loans calculator, for example. These tools will let you work out how much average repayments may be or how much you can borrow based on a repayment sum.

Step Three Shop around for the best deal

Your average personal loan product may well look exactly the same as the next one you look at but that doesnt mean it will cost you the same. Interest rates can vary widely across the industry and you can end up paying a lot more than you need to unless you shop around for the best rates.

The majority of loans will all do the same things and will carry exactly the same terms and conditions. So, if you bear this in mind, youll get no advantage by paying a higher interest rate if there are no add-on benefits. The easiest way to shop around nowadays is, as ever, via the Internet. Even if you just spend a few minutes on an online loan rate comparison site then youll see some big differences in the interest rates being charged. And, remember, the lower the interest rate you pay, the lower your monthly repayments will be. And, the less you pay back every month, the less youll pay back overall. This all adds up to savings for you.

If you follow these three steps then youll be well on the way to finding exactly the right kind of loan to suit you best and youll make sure that you make the kind of savings you can with minimum fuss and effort.