Why choose a personal loan?
Why choose a personal loan?
Personal loans are available from banks, building societies and other finance companies. You may be able to apply online, over the phone or in branch.
Personal loans are a common way to borrow in order to buy a car, fund home improvements, tackle existing debts, manage unexpected bills, or pay for an event, like a wedding, or holiday of a lifetime.
Decide how much you’d like to borrow, what you can afford to repay, and then set a term to suit your budget. Personal loans are typically available for 1-7 years.
You might like to try a loan calculator to estimate your monthly payments.
Any time you borrow, you’re making a commitment to responsibly manage and repay any debt, as well as any interest, fees and charges which may apply.
Benefits of a personal loan:
- Some lenders offer a quotation before you apply for a loan, helping you to understand if you’re likely to be eligible, without impacting your credit score and record.
- If you go on to make a full application, you could get an instant lending decision. Depending on the lender and when you apply, funds could be in your bank account the same day.
- If the interest rates are fixed, your loan repayments will be too, making it easier to keep track and understand your borrowing costs.
- At the end of the loan term everything will be paid off, so long as you’ve made all of the required payments.
- The structured nature of a personal loan also means your interest rates could be lower than those on credit cards or overdrafts.
- On selected loans, you may be able to make overpayments without early repayment charges, potentially reducing your overall term and borrowing costs.
- For an unsecured loan, you don’t need to be a homeowner to apply.
- Using and managing a loan carefully could, over time, help to improve your credit score.
Drawbacks of a personal loan:
- A personal loan isn’t as flexible as a credit card or overdraft for managing ongoing credit needs. To borrow more, you’d need to apply for an additional credit product.
- If you choose a personal loan with variable interest rates, your borrowing costs and monthly payments may change over time.
- Whether or not you’re accepted, ‘hard’ credit searches could affect your credit score, especially if you make a number of full applications for credit in a short period of time.
- Carrying a lot of debt could affect your credit score and your ability to secure further credit in the future.
- On some loans, early repayment charges may apply if you want to overpay, or clear your balance before the end of the loan term.
- You may need to be a homeowner to get a secured loan. In addition, you could lose whatever the loan is secured against if you don’t keep up with repayments.
- Purchases made using cash, a debit card or bank transfer won’t be covered by Section 75 of the Consumer Credit Act 1974, unlike some purchases made using a credit card.
