Unsecured online loan

MONEY: An unsecured loan - that's the price of love

It's never been romantic to put a price on love. Yet it's hard to dispute that affaires de coeur come at a premium, particularly for those tying the knot. Findings from Alliance & Leicester (A&L) show that marrying couples will spend an average of pounds 15,000 from engagement through to the honeymoon.

It is, of course, Valentine's Day tomorrow and any brave soul preparing to get down on one knee to propose to their loved one would be well advised to con- sider this. Few couples have this sum to hand and so one in five need to borrow for the big day.

A quarter of those borrowing money will take out an unsecured personal loan, according to research from A&L, with eight in 10 looking for credit from one of the "big four" banks - Barclays, HSBC, Lloyds TSB or NatWest. But you would do better to look elsewhere.

Competition for personal loans has recently driven the rate down, in many cases to less than 6 per cent, despite base rate rises last year that have since held steady at 4.75 per cent.

Direct Line, for example, has a loan on offer at 5.9 per cent - available both by telephone and online - while Lombard Direct offers 5.9 per cent on its internet loan, rising to 6.4 per cent if applied for on the phone.

However, you may not be eligible for such low rates since many lenders operate a policy of risk-based pricing where the loan rate depends on your credit rating. It can be much higher, says Samantha Owens of financial information firm Money- facts. And watch for early-redemption penalties, typically two months' interest, she adds.

However, not every company levies such charges. Northern Rock, Goldfish and the Post Office are among the few lenders that don't penalise you for paying off a loan early.

Ms Owens recommends a Nationwide building society loan at 6.7 per cent: everyone approved pays the same.

Shopping around for deals is a must. Moneyfacts' research shows that monthly repayments on a pounds 15,000 loan over five years, without insurance, range from pounds 288 to pounds 315.

"A difference of pounds 27 a month may not seem much, but over the five-year term the difference adds up to pounds 1,620," she says. "Loans with payment insurance vary even more, from around pounds 325 to more than pounds 425 a month."

Insurance policies can be ex- pensive and may come with ex- clusions that mean they're of little or no value to the purchaser.