An Easy Guide to Personal Loans
From payday loans to debt consolidation loans, there are many different types of credit available on the market. With a variety of loan options, it can be hard to know which one is best for you.
One of the most popular loans that people apply for is a personal loan, also known as an unsecured loan. Here’s a simple guide telling you all you need to know about them.
What is a personal loan?
From a new sofa or car, to paying off a holiday or a wedding, a personal loan could be an option for you. Personal Loans are different to other forms of credit, such as credit cards or overdrafts, because you’ll receive a lump sum of money, with an agreed percentage of interest on this amount paid back over a set period of time. It’s often known as an unsecured loan because you don’t need to put an asset, such as a house, at risk to take out the loan.
How much can you borrow?
You can generally borrow anywhere between £1,000 and £25,000 with a personal loan, however, the amount will depend on your personal circumstances.
Try our quick loan calculator to find out roughly how much you can borrow.
If you’re hoping to borrow more than £25,000, you’ll need to apply for a secured loan. With a secured loan, you’ll be asked to offer an asset as collateral, usually your house, so the lender has something to take if you fail to make the repayments.
Choosing a personal loan
Choosing a personal loan, either online or in a branch, can be tricky, and there’s a lot to take into consideration when picking the right one to suit you. Here are some important factors to consider when looking into a personal loan:
- The interest rate and APR
- Monthly repayment costs
- Penalties for failure to make repayments
- Early repayment options
- Any set-up costs
- Length of loan term
Advantages of personal loans
- Convenient – One of the main benefits of a personal loan is that they’re usually relatively quick to receive. Sometimes, you can even be accepted and receive your funds for a personal loan within 24 hours!
- Flexible – Whether it’s for travel expenses, home improvements or a new car, personal loans can be used for a range of different needs.
- No collateral needed – When taking out a larger loan, lenders could ask for collateral, such as your house, so they have something to repossess if you fail to make repayments. However, this is not the case with personal loans, as the amount being borrowed is usually smaller.
- Debt consolidation – One personal loan that’s handy if you already have multiple repayments each month is a debt consolidation loan. This type of loan combines your monthly repayments into one, making it much easier to manage your finances.