The top 5 best loans

We look at the top five best loans, tell you about the cost of paying off loans early and look at the cheapest loans with the best early-repayment terms.

Most people end up paying their personal loans off early, which means you should consider the costs of doing so before you get your loan if possible, or be aware of the cost if you're planning to do it now.

The charge you pay for ending an unsecured loan early is capped by law. What this means is that it makes sense to pay off your loan early despite the charges.

How much does it cost?

For unsecured loans of 12 months or less, expect one month's interest charge. For loans of longer than 12 months, expect two months' interest charge. The earlier you repay your loan, the larger the charge will be, because your monthly repayments, although fixed, include more interest in the earlier months. (In the later months they includes less interest and you're paying off your debt faster.)

Based on a five-year, £10,000 loan, this may be a charge of around £300 in the early months. However, it will be better still to take that hit and pay off the debt, if you can, because you'll save a lot on interest over the next few months and years!

Still looking for a loan?

If you're yet to take out your loan, don't just look at the monthly and total repayment costs, but look also at the early-repayment costs. The cheapest loan available right now is from ASDA (with 7.9% APR typical), but that charges two months' interest to pay it off early. For a few pence more, Alliance & Leicester (8.0% APR typical) will let you repay the loan early at a cost of just one month's interest, for example. This'll save you around £100 or more if you repay the debt in the first two years. This is more favourable than Sainsbury's (also 8.0% typical), which has a more normal two-months' charge.

A few loans charge no early-redemption fees. The best of which at the moment are Yorkshire and Clydesdale Banks (both part of National Australia Bank Group). They currently charge 8.9% APR typical per month though, which is around £50 more per year than Alliance & Leicester charges.

All my above examples are based on loans of £10,000 over five years.

Top unsecured loans

(based on £10,000 over five years, and excluding loans that are available to existing customers only)

*This will be higher if you take a repayment holiday or increase the deferred period at the start of your loan.

Alternatives to paying redemption charges

Credit cards can be a good alternative to loans, because there are no early-repayment charges. You need to look for a low rate that matches personal loans or get an interest-free deal. (Interest-free deals come with fees, but this will normally still equate to a lot less than the interest you pay with a personal loan provided you pay it off on time). However, you must be disciplined and pay off at least as much as you would do with a loan each month and make new arrangements at the end of the deal. Also, you mustn't fall for any of these 19 credit card tricks!

Finally, although banks are a little less desperate than they were a year ago, some of them are still eager for cash. If you already have a loan, make a speculative call to your existing provider, saying that you'll pay their cash back early if they'll waive the early-repayment charge and, in addition, allow you a rebate. Have a figure in mind and aim high, because they can always negotiate down.

Make it seem like you're doing them a favour, because in some cases you will be! Ensure, if they decide to bite, that you get in writing that it won't affect your credit record.

Get help from lovemoney.com

If you need a bit of help reducing your debts, we can help.

• First, adopt this goal: Destroy your debt
• Next, watch this video:Get out of debt
• And finally, why not have a wander over toQ&Aand ask other lovemoney.com members for hints and tips about what worked best for them?

Get a top personal loan from lovemoney.com

More: Beware these high risk homeowner loans | 125 tips for dealing with debt