How much do you need?
What are Personal Loans?
Often referred to as unsecured loans, a personal loan allows you to borrow a fixed of money to be repaid over a fixed period of time. Since this type of borrowing is unsecured, you won’t need to use your home or car as collateral. Despite this, it is still important that you can afford to meet your monthly repayments. Not doing so could impact your credit rating and give you problems in the future.
Your credit rating will be taken into account during the application process. It can determine the amount of money a lender is willing to let you borrow. It can also play a role in the rate of interest that may be offered to you, which can vary between lenders.
Essentially, a lower credit score will usually mean a lower rate of interest and a higher rate of approval.
Personal Loans are most often used for large purchases such as white goods or replacing your family vehicle. Alternatively, you could use a personal loan for consolidating your debts if the rate of interest is lower than your current credit obligations.
The Annual Percentage Rates (APR) for personal loans varies based on your unique circumstances, credit score and the lender you apply with.
For example, if you were borrowing £7,000 from one lender over 36 months, at a fixed rate of 3.4% per annum, this would result in a representative rate of 3.4% APR, monthly repayments of £219.26 and a total amount repayable of £7,893.36.
APR’s can vary dramatically, however, 99% is the highest rate of interest allowed before a personal loan is classed as a ‘high-cost’ loan.
Can I get a personal loan if I have bad credit?
Getting a personal loan with a less than perfect credit score, is not unheard of, even though most forms of personal finance are for individuals with a reasonable credit rating.
Applying to lenders who offer bad credit personal loans, may result in higher interest rates than if your credit history were more reasonable.
How do Personal Loans Compare to Alternative Credit Options?
If you are unable to secure a personal loan or would prefer to borrow at lower loan rates there are other options available to you.
Secured Loans are a viable alternative if your credit history isn’t as good as you’d like it to be. Secured personal loans can be taken out to pay for those home repairs for example, and secured against something of high value. This might be a property you own or a vehicle.
Securing your loan against collateral provides the lender with security. In the event that you are unable to repay the total amount you borrowed, they have a way to get their money back. This includes taking the money from your current property and even repossessing your home.
The interest rates for secured finance can be lower than unsecured options. Also, the amount of interest will be a fixed rate, meaning how much you pay each month should stay the same.
Credit cards could be a better option than a secured loan if you are looking to borrow a smaller amount of money. But, you will still need to go undergo affordability checks to see how much you can borrow and the level of interest to be paid.
For a set period of time, some credit cards offer 0% interest rates on larger purchases. Yet you should still be mindful of whether you can afford to meet your repayments. Credit cards too often make you feel like you can splash the cash without consequence.
How much money can I Borrow?
The amount of money you can borrow will depend on which lender accepts your application. Usually, the amount is between £1000 and £5,000 But there are a number of providers who will consider lending £25,000 and upwards.
The money borrowed will normally be repaid in instalments over a period of 12 - 60 months, but some lenders may look at loan terms up to 10 years, particularly if the sum borrowed is especially large.
Advantages of Personal Loans
The key advantages of unsecured personal finance include:
No collateral needed
You can apply online
Fixed, monthly repayment schedule
Option to pay early without fees
Disadvantages of Personal Loans
Some of the drawbacks of this type of loan are:
The most competitive rates are not widely available
Interest rates can vary
May be offered a lower amount than you applied for