When you decide to choose a personal loan there are various things that need to be considered, so doing your research is recommended.
Personal loans are available from high street banks as well as alternative and challenger banks.
Alternative and challenger banks normally offer personal loans to people who may not have the best credit. High street banks normally lend to people with good/top credit scores.
Reasons you might need a personal loan?
- Consolidating other debts, so they are easier to manage with ideally one payment
- Buying a new or used car
- Improving your home, decorating, extension etc.
- Purchasing an expensive item
- Paying for a holiday
- Paying for a wedding
- Sudden or unexpected costs like health or travel
Types of Personal Loans available
There are two types of personal loans available, Secured and Unsecured.
Although for each one there are various options.
For an unsecured loan, these are usually up to £25,000, these are not secured against any assets, and so if you don’t make the payments on time, your assets are not affected.
However if payments are not made on time your credit score can be affected which could make it harder to obtain loans or credit in the future.
Personal loans include:
- Car Loans
- Payday Loans
- Short Term Loans
For a secured loan, these are usually much higher than £25,000 and are secured against assets, normally your home.
They are also referred to as Second Charge loans or Homeowner loans.
As this amount is secured against your home, make sure that payments can be made before taking a secured loan.
Things to consider when choosing a loan
– Make sure you check all the numbers and check affordability before applying for a loan.
– The representative APR. This is what at least 50% of the borrowers will get from the lender, however depending on your circumstances and credit score, this may be different. Higher or lower.
– Check the Total Amount Payable, this shows clearly how much you will pay over the length of the loan, this does not take into consideration any late payment fees or additional interest due to not paying on time.
– Although it sounds quite simple, don’t borrow more than you actually need.
– Check if there is an arrangement fee. Usually this is with secured lenders.
Increasing my chances of getting accepted
Before applying for a loan, take time to get all information in order to increase your chances of being accepted:
- Check all your personal details are correct. Make sure that all your addresses are correct, all the dates are correct and there are no errors.
- Most lenders will want to know what your current financials are like, so have a breakdown of your incomings and outgoings.
- Check how much you can afford to pay each month. If the numbers don’t add up from your incomings and outgoings, lenders will decline your application.
- Check your credit score and file, this will show you a full breakdown of how your credit score is, and ways you may be able to improve this.