Looking for a personal loan or unsecured loan? Why should you consider taking out a personal loan; how much an unsecured loan is likely to cost you. How easy arranging your personal loan or unsecured loan is likely to be. Unbiased help and a personal loan calculator to help find the right unsecured loan for you.
What is a personal loan or unsecured loan?
A personal loan is a sum of money that you borrow from a lender, usually a bank, building society or some other financial institution. Ordinarily, you will receive a lump sum. In return for this, you agree to make regular repayments, usually monthly.
Your personal loan may be an unsecured loan, that is to say, the lender is taking no guarantee against the loan being repaid other than your ability to make the payments. A secured personal loan has the icing on the cake for the lender that you have put up an asset you own as surety for the loan. This means if you don't make the payments the lender could be entitled to force the sale of the asset to get its money back. Most secured loans are secured against your home, effectively operating as a second mortgage.
Assuming you have taken out a repayment loan, which will usually be the case, some of the money you pay each month will go towards servicing the loan, paying interest, and the rest of your payment will be used to pay off part of the capital sum and to reduce the outstanding debt.
Why should I consider taking out a personal loan?
If you're looking to borrow money for between one and fifteen years, a personal loan could be right for you. To decide on what sort of credit is appropriate to your circumstances, you should consider a number of factors. Ask yourself, how much do you want to borrow? How long do you want to borrow money for? Is finding the lowest interest rate the most important consideration or are you willing to pay more for the convenience of borrowing on a credit card? A personal loan might be the best bet if you have a number of debts which you wish to consolidate into one loan. In doing so, you may be able to simplify your affairs as well as reduce the overall monthly cost of credit.
If I decide I need a personal unsecured loan, which type of lender is best?
Banks, building societies and specialist finance companies all offer personal loans - none is best in any outright sense - the market is competitive, you'll need to shop around. Different lenders have different preferences when deciding which borrowers to take on. As a borrower when you're considering one deal with another, make sure you are comparing like with like. The interest rate to look for is the Annual Percentage Rate (APR). This can be a helpful starting point in determining the real interest rate you'll face over the term of the loan but remember to treat the figure with care. For example, does the APR include things like credit insurance on one loan but not on another?
What interest rate will I pay and is it negotiable?
Interest rates vary. Bear in mind that some lenders are only interested in lending to people whom they regard as an 'acceptable risk'. These people may secure lower interest rates. This 'cherry picking' by lenders means that groups considered a higher risk are either offered money at a higher interest rate or not offered a loan at all. Broadly speaking, if you do your homework and get several alternative quotations you should be able to cut the cost of credit and you may be able to negotiate the interest rate you pay.
Self-employed people with a short trading record and those who don't own their own home might be declined or charged a higher interest rate. Lenders vary in their approach, they'll need to ask personal questions about your finances and your future plans before making up their mind on whether to lend and at what interest rate.
Is there 'small print' to look out for when taking out a personal loan?
Assuming you have satisfied yourself that taking out a personal loan or unsecured loan meets your circumstances, make sure you understand clearly all the costs and the conditions you'll have to comply with. Get a written quotation - you are legally entitled to one if you ask for it. Check whether you have the option of changing your mind - is there a 'cooling off' period?
Make sure you understand any penalties which you may be liable for if you want to repay the loan ahead of schedule. These 'early repayment penalties' can represent a significant additional cost to the borrower.
If I have been taken to court about a previous debt, am I blacklisted?
If you have a court judgement against you, this doesn't help. Some lenders won't be prepared to lend to you but others will want to look closely at the circumstances of the previous loan default. Your present financial situation will also play a key part in the decision making process. Be honest about your past, present and future finances.
If the lender declines to give me a loan - does it have to tell me why?
Strictly speaking no but most lenders say they do tell applicants, in broad terms why their application was rejected. Do remember that access to credit is not a right. Most lenders use a system of credit scoring to decide whether you're an acceptable risk. Lenders are in any event bound to tell applicants whether they sought information from a credit reference agency.
How can I make sure credit reference agencies have the right information?
Most information held by credit reference agencies will be correct, but some of it may not be. To correct your records, write to the agency asking them to amend or remove the entry. If within 28 days, you have not received a reply, or the agency disagrees with your request, send within the next 28 days 'a notice of correction'. This should be up to 200 words long and give your side of the story.
If the agency agrees to change your records or add your notice of correction, it will send details to everyone who has requested information on you in the previous six months. Should you reach a stalemate with a credit reference agency, you can write to the Director General of Fair Trading.
What happens if I can't repay the loan?
At the earliest opportunity, you should talk to your lender. They will want to consider carefully your individual situation. If they reasonably believe your financial situation may improve, they may be prepared to suspend loan repayments for a while or extend the term of the loan.
In the final instance, they can insist on the debt being repaid. Your lender will want to determine whether you 'can't pay' at this time or whether you simply 'wont pay'. If your loan is secured on a major asset such as your home, you could be forced to sell it, to repay the debt. Even if the loan is not 'secured' on a specific asset, the lender could nevertheless sue you to recover the debt. If you lose, the net result might still be the same - you have to sell your home.
What is a personal loan or unsecured loan?
A personal loan is a sum of money that you borrow from a lender, usually a bank, building society or some other financial institution. Ordinarily, you will receive a lump sum. In return for this, you agree to make regular repayments, usually monthly.
Your personal loan may be an unsecured loan, that is to say, the lender is taking no guarantee against the loan being repaid other than your ability to make the payments. A secured personal loan has the icing on the cake for the lender that you have put up an asset you own as surety for the loan. This means if you don't make the payments the lender could be entitled to force the sale of the asset to get its money back. Most secured loans are secured against your home, effectively operating as a second mortgage.
Assuming you have taken out a repayment loan, which will usually be the case, some of the money you pay each month will go towards servicing the loan, paying interest, and the rest of your payment will be used to pay off part of the capital sum and to reduce the outstanding debt.
Why should I consider taking out a personal loan?
If you're looking to borrow money for between one and fifteen years, a personal loan could be right for you. To decide on what sort of credit is appropriate to your circumstances, you should consider a number of factors. Ask yourself, how much do you want to borrow? How long do you want to borrow money for? Is finding the lowest interest rate the most important consideration or are you willing to pay more for the convenience of borrowing on a credit card? A personal loan might be the best bet if you have a number of debts which you wish to consolidate into one loan. In doing so, you may be able to simplify your affairs as well as reduce the overall monthly cost of credit.
If I decide I need a personal unsecured loan, which type of lender is best?
Banks, building societies and specialist finance companies all offer personal loans - none is best in any outright sense - the market is competitive, you'll need to shop around. Different lenders have different preferences when deciding which borrowers to take on. As a borrower when you're considering one deal with another, make sure you are comparing like with like. The interest rate to look for is the Annual Percentage Rate (APR). This can be a helpful starting point in determining the real interest rate you'll face over the term of the loan but remember to treat the figure with care. For example, does the APR include things like credit insurance on one loan but not on another?
What interest rate will I pay and is it negotiable?
Interest rates vary. Bear in mind that some lenders are only interested in lending to people whom they regard as an 'acceptable risk'. These people may secure lower interest rates. This 'cherry picking' by lenders means that groups considered a higher risk are either offered money at a higher interest rate or not offered a loan at all. Broadly speaking, if you do your homework and get several alternative quotations you should be able to cut the cost of credit and you may be able to negotiate the interest rate you pay.
Self-employed people with a short trading record and those who don't own their own home might be declined or charged a higher interest rate. Lenders vary in their approach, they'll need to ask personal questions about your finances and your future plans before making up their mind on whether to lend and at what interest rate.
Is there 'small print' to look out for when taking out a personal loan?
Assuming you have satisfied yourself that taking out a personal loan or unsecured loan meets your circumstances, make sure you understand clearly all the costs and the conditions you'll have to comply with. Get a written quotation - you are legally entitled to one if you ask for it. Check whether you have the option of changing your mind - is there a 'cooling off' period?
Make sure you understand any penalties which you may be liable for if you want to repay the loan ahead of schedule. These 'early repayment penalties' can represent a significant additional cost to the borrower.
If I have been taken to court about a previous debt, am I blacklisted?
If you have a court judgement against you, this doesn't help. Some lenders won't be prepared to lend to you but others will want to look closely at the circumstances of the previous loan default. Your present financial situation will also play a key part in the decision making process. Be honest about your past, present and future finances.
If the lender declines to give me a loan - does it have to tell me why?
Strictly speaking no but most lenders say they do tell applicants, in broad terms why their application was rejected. Do remember that access to credit is not a right. Most lenders use a system of credit scoring to decide whether you're an acceptable risk. Lenders are in any event bound to tell applicants whether they sought information from a credit reference agency.
How can I make sure credit reference agencies have the right information?
Most information held by credit reference agencies will be correct, but some of it may not be. To correct your records, write to the agency asking them to amend or remove the entry. If within 28 days, you have not received a reply, or the agency disagrees with your request, send within the next 28 days 'a notice of correction'. This should be up to 200 words long and give your side of the story.
If the agency agrees to change your records or add your notice of correction, it will send details to everyone who has requested information on you in the previous six months. Should you reach a stalemate with a credit reference agency, you can write to the Director General of Fair Trading.
What happens if I can't repay the loan?
At the earliest opportunity, you should talk to your lender. They will want to consider carefully your individual situation. If they reasonably believe your financial situation may improve, they may be prepared to suspend loan repayments for a while or extend the term of the loan.
In the final instance, they can insist on the debt being repaid. Your lender will want to determine whether you 'can't pay' at this time or whether you simply 'wont pay'. If your loan is secured on a major asset such as your home, you could be forced to sell it, to repay the debt. Even if the loan is not 'secured' on a specific asset, the lender could nevertheless sue you to recover the debt. If you lose, the net result might still be the same - you have to sell your home.
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