Life can throw unexpected things our way, and this could involve making a purchase that we are not prepared for. A personal loan can help with covering the cost of anything from a new washing machine to an unforeseen bill.
A personal loan can aid you by covering this unexpected cost up front, leaving you able to pay it off monthly in more simple and manageable payments that you otherwise would have.
What Is A Personal Loan?
A personal loan is a type of credit that you can apply for that is for personal use, rather than business or commercial use.
A personal loan can be either secured or unsecured. A secured personal loan is one which is secured against an asset of yours that is of value, for example your car or house. An unsecured personal loan is not secured against any assets, but the loan amount you are offered will be dependent on your income and personal circumstances. Generally, personal loans are unsecured, but you may be offered a secured personal loan if you have a poor credit score and credit history. This just provides the lender with some security and reassurance if you were to ever be unable to repay the loan but your asset, (e.g. car or home), may be repossessed if you don’t keep up your repayments.
If accepted, you will receive your personal loan in full, and then you will have arranged to pay it back with interest in instalments over an agreed period of time.
What Is A Personal Loan Used For?
A personal loan can be used for a multitude of reasons.
Whether this be a loan to purchase a new car, to pay some unexpected bills, to carry out some home improvements, or to pay for a wedding. The reasons for use of a personal loan are endless!
How Much can I Borrow With A Personal Loan?
As we mentioned before, a personal loan can be either secured or unsecured. Unsecured personal loans are usually for a smaller amount, generally under £25,000.
A personal loan will generally need to be secured against your assets when the loan amount required exceeds £25,000.
What Are The Benefits Of Getting A Personal Loan?
So, what are the benefits of taking out a personal loan?
Firstly, you will agree with your lender how much you are able to pay over a set period of time. This enables you to make smaller, more manageable repayments each month, and allows you to budget the rest of your finances.
With a personal loan, you may be able to borrow more than you would with a credit card. If your credit card only has a small credit limit and you are looking to borrow more, a personal loan may be an option for you.
If you have multiple debts that you are paying off individually, a personal loan is an opportunity to group all of these repayments together into one lump sum. This enables you to pay one amount every month rather than several separate payments.
If your loan agreement specified a fixed rate, then you can rest assured that you will be paying the same sum every month and the interest won’t vary.
Things To Consider Before Applying For A Personal Loan?
Firstly, you need to consider whether a personal loan is the right option for you and if the repayments are something that you can comfortably afford to pay each month.
Also, you may be paying a higher interest rate than what is advertised. If you have a less than perfect credit score, a lender may still offer you a loan, but at a higher rate of interest than what their example originally stated.
If you would like to check your credit score before you apply for a Personal Loan, Credit Knowledge offers a FREE trial in which you can see a thorough breakdown of your report. Find out more here.
Getting A Personal Loan With The Loan Tree
Here at The Loan Tree we can help you apply for a personal loan by using the information you have given to us, to provide you with an instant decision on which of the lenders on our panel has agreed in principal to offer you a loan.
By clicking on the button below, you can use our free broker service to apply for a Personal Loan today.