Guide to Personal Loans
What is a personal
loan? A personal loan is money lent to an individual by a
financial institution for a specific personal purpose.A personal loan is an amount of money offered, normally by
lending institutions such as banks and building societies, on
the condition that it will be paid back at some later date.
Personal loans are available in a whole host of formats and can
range from £500 upwards.
One main difference between a personal loan and a home loan is
that most personal loans are unsecured. So, that means that
there is no collateral provided and the only guarantee that a
borrower can give the lender is his reputation for good credit.
This is also one of the main reasons why personal loans have
interest rates that are a percentage higher than most other
loans.
A personal loan is money you borrow from a bank, building
society or other financial institution. A personal loan is a
loan that's not secured by personal property or collateral like
a home or car.
A personal loan is available in varying amounts with different
rates, usually depending upon the purpose for which you require
the loan.
An unsecured personal loan is usually more expensive than
homeowner loans as the lender doesn't take a charge on your
loan. In other words, with this type of loan, you do not
guarantee it with your home.
You borrow an agreed sum of money for an agreed length of time,
anywhere between five months and ten years. The lender offers
you a personal loan because they make money by charging interest
on it. The interest rate can be either fixed or variable. In
most cases you'll get a decision within 24 hours.
Under most personal loan arrangements you receive a lump sum,
equal to the amount of the agreed loan and in return you agree
to make regular repayments. These repayments are normally
monthly and cover both the interest due and the capital
outstanding loan amount.
If you are looking to borrow money over a period of less than
ten years, whether you need the money for a purchase or perhaps
to repay existing debt, then a personal loan may be suitable for
your needs.
Personal loans are just another form of credit. If you are
considering a personal loan to run alongside other forms of
personal credit such as overdrafts and credit cards, you must
give careful consideration to whether you will be able to afford
the total of your regular payments. When considering the
situation it is wise to take into account your ability to pay
were you unable to work due to illness or should you lose your
employment.
Frequently the lending institution will ask for details of the
reason you require the loan. Although the purpose of the loan
may have little impact on their decision to grant the money, it
can have some influence on the maximum term of the loan.
It is more likely that larger sized loans, for purchases such as
cars, home improvements etc. will result in a longer repayment
term. It is not uncommon for the purchase of a car to
established with a repayment term of 3 years whilst the term for
home improvement loans can be for much longer terms, sometimes
as long as ten years.
Making repayments under personal loans is the same as servicing
any debt you may have. If you find that you have difficulty in
making your repayments, seek advice from your lender at the
earliest opportunity. The earlier you tell them of the
difficulties the more sympathetic they are likely to be. They
may, for instance, accept a reduced repayment until your
circumstances improve.
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