All you need to know about personal loans
In a perfect world, we’d all have a savings account, a current account and a cash ISA that we could dip into when things go wrong. But the world isn’t perfect and every now and then we need an extra injection of cash to help us over a hump or prevent us going overdrawn. Credit cards are a useful stopgap but for longer-term planning and larger expenses such as a new second-hand car or a replacement boiler, a personal loan can often be a better option. Here’s our handy guide on how to get the best deals available.
We’ll help you find out about personal loans and how to compare them to find the loan most suited to you. Personal loans, also known as unsecured personal loans, are based on your personal circumstances i.e. how much money you earn each month, and your regular monthly outgoings.
Personal Loan or Credit Card?
An unsecured personal loan can be a cheaper way to borrow money than say, a credit card, if you're looking to borrow a lump sum over a set period of time. That’s especially true if you're looking to borrow quite a bit.
Personal loans typically cover amounts from £1000 to £25,000. Repayments are usually spread over a fixed period from one to 10 years, depending on your personal circumstances.
Important things to consider
APR (Annual Percentage Rate) is the total amount the loan will cost you on top of the amount borrowed, including, interest and charges. The APR advertised on all personal loans is representative – which means it’s just an example. Not everyone will be offered the APR advertised. You could end up with a higher APR than you’ve applied for.
Early Repayment Penalties are charged by some lenders if you try to pay back the loan quicker, but not all providers charge these. If you think you’ll want to pay off your loan early, it might be sensible to look at one of these lenders.
Making every payment is really important. Should you fall behind in making repayments, or stop them altogether, the provider could take legal action against you.
This is why it is so important to compare personal loans to find which ones are the best available to you. Sometimes the cheapest personal loans will not will not cost the least in the long term, when you consider the total amount paid over the entire loan period.
What is a credit check and how does it affect me?
A credit check or credit report helps lenders find out about your credit history. It helps them assess whether you are able, and likely, to meet loan repayments on time.
Your credit history, amongst other criteria, is used by lenders when deciding on whether to give you a personal loan or much larger longer term loan like a mortgage.
Home credit check information will be provided by you, including your address history and financial information like bank details. Credit reference agencies then supply any records of late payments and missed payments, and if you’ve had any county court judgements against you.
Your credit details will affect the amount you can borrow as well as the terms of your loan like the interest rate.
Your credit history will sometimes ‘wave a red flag’ if you’ve applied for loans – whether or not you were accepted – and it could influence the decision. This is another good reason to thoroughly compare your options before actually making a loan application.
Compare Personal Loans
It's really easy to compare personal loans online – just click above to see how personal loans compare. You can search on how much you want to borrow or by the maximum amount you can afford to repay each month. Then enter in the length of time you'll be repaying over, and you’ll get a table showing the options, it shouldn't take long to find low rate personal loans that will suit your needs.
Please remember though, that however low the APR, a loan is an expensive way to get money and not without risk if you fail to meet the terms agreed. Think carefully whether the loan is essential and thoroughly compare all of your options before taking that step.
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