What is a personal loan?

The term “personal loan” is a popular phrase among financial services companies and can mean either loans secured on assets such as a house or unsecured. The Personal loan market in the UK is huge, hence there is a lot of competition from banks, online providers, supermarkets, and credit card companies who act as providers.

Many individuals or families use personal loans to purchase luxury items such as holiday or a new car whilst others consolidate existing debts such as credit cards or store card borrowings. Generally, the concept behind a personal loan is to provide funds to the applicant subject to status so they can choose what they wish to do. Other uses for a personal loan could be to start a small business or fund home improvements.

Some hints and tips on choosing the right personal loan.

We have all received offers from lenders offering competitive personal loans that are either unsecured or secured. Always read the small print as you maybe surprised to learn that the rate you will be offered if you choose to apply will depend on your status and bad credit history and therefore, could be higher. In some instances, your personal loan application maybe declined as the lender is not obliged to lend you money despite sending you an offer in the post. If you do apply for such a loan and then decided to pay back the amount early, consider checking what the penalty charges would be, as they maybe expensive.

Most lenders offer some form of payment protection insurance to pay back the personal loan if you are unable to work through illness or redundancy. Again, always read the terms of conditions and clarify with the provider whether the benefits apply to your circumstances. Some policies for instance do not provide cover for the self employed.