Personal Loans
A personal loan is a loan which is taken out by an individual or jointly for a variety of reasons. It can either be secured by an asset such as your home or unsecured if you have no collateral, as in the case of a tenant. Personal loan is the commonly used term but it can also be referred to as a signature loan.
Personal loans, whether secured loans or unsecured loans, can be used for a range of purposes. It may be used to pay for a vehicle purchase such as a car or caravan or other major events like a wedding, a holiday home or improvements on your current home for example; an extension or a new kitchen or bathroom (which can generally increase the value of your property). Likewise you can borrow for other practical reasons too, such as consolidating expensive debts into one monthly payment, which could prove to be more affordable for you than paying the high interest rates on your credit and store cards. You may need it to pay of an unexpected bill, if you have had to pay for major repairs on your house or have the boiler fixed or replaced, you may need a loan to help pay for it.
You can apply for a personal loan in several ways. You can go directly through a bank or building society, apply online or over the phone. If you go via a bank or building society, it does not need to be the branch that you have an account with if they do not offer the best deal for you. Applying online is quick and easy and is becoming a popular way of applying for a loan from a large number of providers of financial services. Some people prefer to apply over the phone as they like to discuss things with a person and at the same time avoid having to travel anywhere to do so, this works well for those who have difficulty in traveling or who don't have the time to do so.
Whichever way you chose to get a loan the first and most important rule is to shop around and find the best quote for your personal circumstances. There are a several comparison websites to make the process of comparing the large volume of ever-changing offers a quick and simple one but make sure you do compare before you commit to a loan of any kind. Remember the amount you borrow will not be the amount you pay back. Once interest is added and paid over the repayment term the actual Total Amount Repaid (TAR) will be more, depending on the rate of interest the loan is set at. It is this figure that you should review and compare before committing to a loan.
Each loan offered is based on your individual personal circumstances, or a combined overview if you are applying as a couple. It will be based on income, credit history and current debt levels. If you are applying for a secured loan it will also take into account the value of your house against the outstanding mortgage balance. Generally the more you borrow, the lower the interest rates tend to be, however this should not sway you into borrowing more than you actually need or can afford.
A majority of personal loans are actually of the unsecured variety and they can be a very cost-effective way to borrow money. Just because you are a home-owner doesn't mean you have to take out a secured loan. This gives them the opportunity to take out a loan without putting their home at risk. With an unsecured loan you can generally borrow amounts between £1,000 and £25,000 to be repaid over a period of 3-10 years. The minority of personal loans that are secured on the applicants home which allows you to borrow a larger amount, up to £250,00 in some cases, and repaid over a 5-25 year period. Interest rates will vary depending on the lender and your loan requirements but can range between 6-20%.