Help With Loans
If you want to borrow money and pay back an amount every month, a personal loan is one option.
What is a personal loan?
Personal loans are loans that a bank or other lender makes that are not secured against any asset such as your property. They’re also known as unsecured loans.
Personal Loans – The Pros
> Able to borrow more than with a credit card
> Loan repayments may be fixed amounts. That means your repayment amount is going to be the same every month and it’s easier to budget.
> The interest rate you pay on a personal loan is also usually fixed (but not always).
> You can choose how long you’d like to take to repay the loan. Remember the length of a loan will affect the amount you are charged in interest.
> You can consolidate several debts into one personal loan, potentially reducing your monthly repayment costs. But be careful, as this may mean extending the length of the loan and so paying more overall.
You can make over-payments or pay off a personal loan in full before the end of your agreement without penalty.
Personal Loans – The Cons
- Personal loans have higher rates of interest than some other forms of borrowing, particularly if you want to borrow a smaller amount, such as £1,000.
- Because the interest rate may reduce the more you borrow, you may be tempted to take out a bigger loan than you need.
- Older loans (taken out before 1st February 2011) normally have an early repayment charge if you want to pay off your loan early or overpay.
Personal loan cooling-off period:
There is a 14-day cooling-off period from either the date the loan agreement is signed or when you receive a copy of the agreement, whichever is later.If you cancel, you have up to 30 days to repay the capital and interest.
What to watch out for in a personal loan:
Get the interest rate advertised with the loan, which is known as the representative APR (or annual percentage rate).This is the rate that you will see on posters or banks’ websites, but not everyone will qualify for it. In fact, loan providers only have to offer this rate to just over half (51%) of borrowers they lend to.If your credit rating is less than perfect, you may be accepted for a loan but charged a much higher rate of interest than the representative APR. Your application for a personal loan will not necessarily be accepted.
Secured Personal Loans
If you own your own home, you may be tempted to consider a secured loan.
However, this is a riskier option as your home is secured against the money you borrow.
This means that if you can’t repay the loan, the lender could force you to sell your home to pay off what you owe.