A Guide to Unsecured Personal Loans
Unsecured personal loans are offered by lending institutions such as banks and building
societies and are so called because the lender requires no security for the debt.
They are not available for speculative purposes or business purposes. Depending
on the individual lender some other purposes may also be excluded, for example the
purchase of timeshare property. Below is a quick and easy guide to UK personal loans.
Choosing the right loan
Personal loans are available for a range of different amounts and repayment terms.
Depending on the amount and purpose of the loan, you will be able to choose from
a range of repayment periods. Larger loans such as those over £10,000 can
usually be taken over longer terms i.e. 7 to 10 years. The minimum loan amount is
typically £1,000 although some lenders do offer £500 and upwards. The
maximum amount you can lend is £25,000, although this will vary between lenders
and products.
Need a loan over £25,000? If you’re a homeowner you can consider a secured loan.
The amount borrowed is subject to an interest charge, and the interest rate applied
is known as the Annual Percentage Rate (APR). Generally, it is advisable to compare
the APRs of different products as a means of determining how competitive they really
are. It is not unusual for lenders to offer different APRs depending on the method
of application e.g. applications by telephone may receive a higher APR than those
done online, so it’s well worth shopping around for the best deal.
If you are looking for a low cost loan, comparing the APR is a good place to start.
Lenders do quote interest rates in different ways, and it's worth familiarising
yourself with these before you start:
- A fixed interest rate will stay the same throughout the term of the loan,
regardless of any changes in the bank base rate. This means your monthly repayments
should always stay the same, allowing you to budget accurately.
- A variable interest rate may rise and fall in line with any changes to the
bank base rate. This could result in your monthly repayments changing during the
term.
In addition:
- A typical interest rate is an indication of the rate you will be offered
as it is the rate that over 66% of successful applicants receive. The exact rate
offered to you will be dependent on the loan amount and term and on an assessment
of your personal circumstances.
- A set interest rate is offered to all successful applicants, regardless of
the risk they present and the loan amount and term.
Although lowest APR is one factor that contributes to a ‘cheap’ loan,
you should always pay attention to the small print as any additional costs will
be found there. Some lenders do apply an early settlement charge (also known as
a redemption penalty) if the debt is repaid in full before the agreed end date.
This can be up to 2 months interest so it pays to check this out before you commit.
If you think you'll clear the debt before the end of the term then your best bet
will probably be a loan with no early settlement costs, even if the APR is slightly
higher. Whatever you decide, you’ll need to do your sums before you sign on
the dotted line.
Personal loans are repayable on a monthly basis. If there is a degree of flexibility
then the lender may permit over-payments and lump-sum payments, both of which allow
you to clear the debt over a shorter time period than first agreed. If your loan
is a truly flexible product then you may also be able to withdraw funds from the
account on a rolling basis, providing you stay within your credit limit. Lenders
also offer repayment holidays or payment breaks, allowing you to take a break from
your monthly repayments either at the start of the loan (known as 'deferred repayment')
or at an agreed point during the term. Interest will continue to accrue on the outstanding
balance and this may result in increased monthly payments so your debt is still
repaid over the term agreed at the outset.
Getting accepted for a personal loan can sometimes prove difficult if you’ve
got bad credit, have changed addresses frequently, have no previous credit history
or are self-employed. There are lenders who can help those who need 'bad credit'
loans and those who have difficult personal circumstances. The APR is likely to
be higher than that offered by a standard personal loan provider, but the chances
of getting accepted are far greater.
If you’re a homeowner with ‘bad credit’ or difficult personal
circumstances it may be worth considering a secured loan.
Click to compare secured loans.
Personal loans are governed by the Consumer Credit Act 1974. The Act contains strict
regulations about how money is lent and covers unsecured loans up to £25,000
(these are known as 'regulated loans'). When taking out a personal loan you will
be asked to sign a credit agreement, and you'll be bound by it's terms. As extra
protection for both yourself and the lender, insurance policies (known as payment
protection insurance) are available and these will cover your repayments in the
event of sickness, accident or unemployment. In the event of your death your debt
could even be repaid in full. Although beneficial, these policies can be costly
with both the cover and cost varying between lenders. You should always check what
a policy includes and excludes, as this may affect your decision to take it out.
Stand-alone policies are available and these may prove better value than the policy
offered by your personal loan company.
How do I apply?
This site provides you with the facility to apply online for your personal loan.
You'll notice that many of the most competitive products in the market place today
(including those on our Best Buy tables) are available to you through our online
application process. Providing the product has an apply icon you can submit your
application via this website. This will ultimately save you time as it means you
won't need to contact the personal loan companies direct. We also hold details of
loans designed specifically for applicants with a poor credit history or those who
have difficult personal circumstances - whatever your circumstances we can help
you to find the right product.
When you apply through us you will either complete a short application form via
our secure server, be re-directed to the lender's website to enable you to follow
their own application process or you will be asked to submit your details for a
member of our Sales Support Team to contact you. Once your application has been
submitted to us, either our Sales Support Team or the personal loan company will
send you an e-mail or letter acknowledging your application. If you completed our
application form it will be passed to your chosen lender in order that they may
process it.
What happens next?
Your application will be processed quickly and a decision communicated to you within
a few days. Lenders use credit reference agencies to obtain information about you
as they provide a detailed analysis of your financial position, in particular whether
you have any bad credit such as County Court Judgements, defaults or arrears, details
of any existing credit agreements or searches made by finance companies plus information
relating to the electoral roll. If you are refused a personal loan or wish to make
enquiries concerning your own credit file you can apply to the credit reference
agencies for a copy of your record.
Equifax PLC
You
can view your credit file with Equifax for only £12.50. They also offer easy
to use online facilities to dispute errors in your credit file instantly. To find
out more click here.
Post:
Credit File Advice Centre
PO Box 1140
Bradford
BD1 5US
If you do have difficulty making your repayments you should seek advice from your
lender immediately. The earlier you contact them, the more sympathetic they are
likely to be. If you have been refused credit or need advice with debt give our
financial helpdesk a call on 0870 111 0001. Lines are open from
9am to 8pm Monday to Thursday, Friday 9am to 5.30pm and Saturday 10am to 4pm. Alternatively,
advice is available from your local Citizen’s Advice Bureau, the National
Debtline or the Consumer Credit Counselling Service (CCCS).
Security
All of your personal information is secure with Moneysupermarket. Our site is protected
by VeriSign Secured encryption which provides a secure communication between
our website and the visitors to it. Confidential information is passed to us via
a secure server only.
Any information you provide is submitted to your chosen service provider in encrypted
format to ensure security and privacy at all times.
Click here to view our certificate details or email us if you have any technical queries
Please note, we do not charge a fee for the service we provide. Our income
comes from the product providers, who pay us a fee when you complete your purchase.
We recommend that you read the guides available throughout the site for more information
on the type of product you are interested in. You should also take time to read
our Terms and Conditions, and in any case you should
do so before using any of the services provided by this site.
YOUR PROPERTY IS AT RISK IF YOU DO NOT KEEP UP THE REPAYMENTS OF ANY LOAN OR HIRE PURCHASE AGREEMENT SECURED ON IT. MISSING PAYMENTS WILL HAVE SEVERE CONSEQUENCES AND MAY MAKE OBTAINING CREDIT MORE DIFFICULT IN THE FUTURE.
