Personal loans are at the heart of consumer borrowing, making up the vast majority of loans that are issued each year by lenders. They can come in a huge variety of forms and are offered by hundreds of mainstream and independent lenders from across the UK.
In this guide, we’ll take a look at the different types of personal loans available along with some handy information about how you can pick up a great rate on your next line of credit.
What Are Personal Loans?
Personal loans, unlike payday loans is a term used to describe any form of unsecured loan which is borrowed as a lump sum over a fixed number of years. Unsecured loans are those which are not tied to any assets that you own meaning that none of your personal possessions will ever be put at risk through non payment.
Whilst this is a great way to protect your personal assets, it does mean that you’re likely to receive a slightly higher interest rate to account for the added risk that the lender takes on by waiving your possessions as security.
Each application is assessed on its individual merits and, with so many personal loan providers currently operating in the UK, there are plenty of suitable options for those with a less than perfect credit history.
What Can Personal Loans Be Used For?
The beauty of unsecured loans is their flexibility. They can be used for almost any life expense including home improvements, debt consolidation, the purchase of a new vehicle, a holiday, school fees or simply to take care of an unforeseen financial emergency.
How Are My Repayments Calculated?
Whenever you apply for a loan, you’ll select how much you want to borrow along with the length of time that you’d like to repay the loan over. Depending on your credit rating and ability to repay the loan on time, the lender will then calculate a rate of interest specific to your application that takes into account the solidity of your credit report to reflect the risk that unsecured lending brings.
Interest can either spread evenly across each month that you’re repaying your loan in order to bring consistency to your repayments. It’s also possible to arrange your loan so that the interest paid reflects the total amount outstanding, meaning that your interest payments will reduce each month as the total amount of debt decreases.
These repayments will then be listed on your credit agreement which will need to be electronically signed prior to funds being transferred.
Need to repay your loan early? Not a problem! If you’d rather clear off your personal loan before the end of the credit agreement, simply get in touch with your lender and they’ll be able to quickly and easily give you a final settlement figure. It’s becoming more and more common for lenders to waive early repayment charges, however it’s well worth investigating this with your lender before committing to an early repayment.
What If I’m Unable To Make Repayments On My Personal Loans?
Typically, repayments are made each month by direct debit. If you find that you’re financial circumstances have changed since taking out the loan and repayments are becoming difficult then it’s certainly not the end of the world.
Simply contact your lender straight away and explain your situation to them with complete transparency. They’re obliged to be sympathetic towards your situation and will often be able to freeze interest and charges until you’re back on your feet. The worst thing that you can do is to bury your head in the sand as this will only lead to further charges and a great deal of stress for you as the borrower.
Remember – always keep in touch with your creditor and they’ll do everything in their power to help you overcome a temporary shift in finances.
How Do I Apply For A Personal Loan?
The straightforward application process has been helped massively by the advancement of online technology. No longer do you have to sit through lengthy appointments with your bank before waiting several weeks for an underwriting decision that could prove unfavourable anyway.
It all starts by completing your initial application form here at Creditraters.com. We’ll then help you to compare personal loans from across the UK by presenting you with a range of information so that you can make an informed decision on which provider will suit you best.
Each lender takes into account a wide variety of factors during the application process, however most of this is now done online in a matter of minutes, so in most instances you can expect a same day decision. You’ll be required to provide details about your current employment status, income, existing outgoings and the purpose of your loan, as well as where you’d like the funds to be paid should you be accepted.
Once approved, you’ll receive a credit agreement which will detail how much you’ll need to pay back, the dates of your repayments, and the total amount of interest that will be payable. This will help you to keep on top of your new credit facility and ensure that your credit score improves as timely payments are made.