Personal Loan Choices
Personal Choice
Summary: Personal loans are simple to arrange, with a proliferation of providers. What matters is the overall cost of borrowing the money. Make sure you compare the deals and find the best.
Taking out a personal loan can be likened to winning the lottery - with one major difference. It has to be paid back, with the addition of interest.
A personal loan, as the name implies, is for you to spend as you please. You could use it to buy a car, or even "his and hers" cars, to improve or re-vamp your home, to have the holiday of a lifetime or even to pay off any other loans or credit cards, meaning that re-payments will spread over a longer period and at a much lower interest rate than the average loan.
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The amount you can borrow on a personal loan is normally up to £25,000. You should be able to get a decision in principle very quickly, to be verified on completion of your application.
You can collect details of one of these loans whilst you're paying for your cornflakes - many of the supermarket chains offer them and some are quoting some attractive rates. Banks and building societies are other sources.
What you need to be aware of is the small print. Beware of penalties if you decide you're able to pay off the loan early. The better lenders don't normally charge more than a couple of month's interest for this. You never know what's around the corner and if your circumstances change for the better you may not need the loan for very long. Interest rates vary too - there's a very wide range. With any loan deal what you need to consider, apart from any penalties, is the total sum on money to be paid out in interest over the whole term of the loan.
If you only need the loan for a few months, look at the rates which you can get on a credit card as this would probably be the best course of action.
It's usual for interest rates to be fixed for the period of the loan so you know just how much you'll be repaying every month. Fixed interest rates are fine if rates go up in the loan period, but if they go down, you're the loser. It's a case of taking a chance, but whether the rates go up, down or stay the same, at least you know exactly what the outgoings are. Most lenders will require you to pay by direct debit, so everything is done automatically - you just need to ensure the required amount is in the bank every month!
As far as the formalities are concerned, any potential lender will need to check that you're not a bad risk and that you don't have a history of unpaid loans and bad debts. This means that they'll check your entry on the credit registers. A less than perfect record doesn't automatically exclude you from the loan market, but you may be charged a higher interest rate. If you're self-employed or working on short-term contracts it will be more difficult to find the right deal.
