A personal loan is also referred to as an unsecured loan and in some cases a tenant loan. More recently it has also been called a secured loan so it really covers any type of loan. These types of loans are very popular as you can get them from your bank, building society or even a specialist lender online.
The amount you can borrow on an unsecured personal is normally from £500 to £25,000 with repayments up to 10 years. With an unsecured loan it is not tied into anything but if you miss any loan payments it could adversely affect your credit history. The net result of a bad credit history is you may find it difficult to get a credit card or even get interest free deals if you want to buy something like a TV or anything else on the high street.
With an unsecured personal loan you can expect to pay anywhere between 7 - 20% interest rates so hence why it's important to search around. Don't just rely on your own bank or building society, although they should be used for comparison. You should also look online and of course a small number of retailers such as Tesco also provide personal loans and they too should be considered.
One tip when doing a comparison is to ensure you are comparing like for like when it comes to interest rates. A lot of lenders will quote the APR as a yearly APR whereas other lenders will quote a monthly APR, which will obviously appear to be a lot more competitive. So just be aware of these marketing/advertising tactics.
In terms of repayment an unsecured loan can be repaid over a period of 10 years although some lenders may offer extended repayment periods if you have a good credit history. However, there may also be a flip side to this as the lender may also charge you a slightly higher interest rate for the extended loan period. So the best advice is to try and repay the loan over the shortest period possible.
You may also need to have a repayment break which some lenders are now offering in an attempt to gain your business. This normally works at the beginning of the loan i.e. the lender will give you the loan but you don't have to make the first payment until 3-5 months after this.
Conclusion
The interest rates, repayments period, and terms attached to unsecured personal loans can vary from one lender to another. It is therefore important to compare loans in order to find the best one for your needs.
When you compare these loans you need to look at a number of different factors before you make your choice, including the interest rate charged, the terms and conditions, the repayment periods offered, and any penalties or set up fees that may be applied.
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