Want a cheap unsecured personal loan? A relatively simple monetary transaction a year ago and at a competitive interest rate. Now, six months of financial turbulence and credit crunching have put most lenders on red alert.

Obtaining the best interest rate is tough, even for potential borrowers with decent credit ratings, as providers tighten up on their lending criteria.

Getting the best deal

But you're still determined; you want that new car or there's the cost of a wedding to fund. Despite increased interest rates, a personal loan of say £10,000 or £15,000 is, in your circumstances, an ideal way of raising the necessary cash.

How do you achieve the best financial deal?

The keys to a cheap personal loan are the cost of the monthly repayment and the total cost of the loan over its term. You need to compare like with like.

Personal loans can be flexible in the amount borrowed and length of repayment term usually 2-7 years, but remember that borrowing over a longer period to minimise the monthly repayment will significantly increase the cost of the loan and the total amount paid in interest.

Some loan providers structure deals so that lower interest rates apply once a certain loan threshold is exceeded; the annual percentage rate APR can drop to around 7% for loans above £5,000. Then there are incentives such as 'repayment holidays', but you need to be aware that interest accrues during that holiday period.

Beware the asterisk

It's the APR you need to focus on when comparing personal loan rates, particularly if it's followed by the word 'typical' and a small asterisk. Don't automatically assume this is the rate you'll be offered.

Many lenders operate this system, an example being AA Loans. At the beginning of this month it was offering just 6.5% APR typical on loans of £7,000 to £25,000 at terms of up to 7 years. I was given the opportunity to borrow £8,000 and pay £157.66 per month for 60 months; total amount repayable £9,459.60.

Am I typical though? The asterisk referred to a footnote small print which said: "the rate offered will depend on credit assessment procedures, your personal circumstances and other related factors. AA Loan rates range from 6.5% to 22.3% on loans of £7,000 to £25,000."