Personal Loan

A personal loan is defined as a loan that is given to an individual without using any form of collateral, as an example your house could be used as a guarantee for the loan.  Usually you can obtain a personal loan for absolutely anything that you desire.  Personal loans are obtained through private loan companies, brokers, banks, financial institutions and building societies.  Rates of interest charged on a personal loan will vary depending on how much you intend to borrow and over the length of time you will be paying the loan back.

You can get a personal loan for amounts as little as £500.00 or up to in excess of £100,000.  As previously mentioned the percentage of interest paid back on the loan will be significantly reduced the more that you borrow.  You may wish to finance your car through a personal loan rather than through a higher purchase option.  Usually you are able to get a better rate of interest than with other forms of short term loans.

Other factors of personal loans can include payment protection.  Payment protection will be of use if, for example, you lost your job or became ill and unable to meet the repayments on the loan, with the payment protection the loan will be repaid on your behalf by the protection company.  If you were to choose the payment protection on your personal loan then your monthly payments will increase to pay for the protection insurance policy.  The payment protection gives you the added security that will be required if you do happen to have financial difficulty.

Personal loans are not as easy to obtain as short-term loans.  You will need to have a credit check and the loan company will ask for a lot more information about your financial status.  People who have a poor credit rating will often find it harder to get a personal loan.  Personal loans are paid back over a predefined period of anywhere from 1 year to 10 years and payments are taken on a monthly basis directly from your bank account.  Once you have entered into the long term loan agreement then you will not be able to break out of it easily.  If you want to repay your loan early then there are penalty clauses that are setup in the loan agreement.  Personal loans that are paid back early can have any where up to 2 months interest as a penalty payment.

Personal loans are not designed as short term loans and are for purchases such as cars, holidays, home improvements or debt consolidation.   When you are choosing a personal loan there are lots of different conditions available and this will be something that you will want to look out for.  Personal loans that are offered to homeowners and tenants will vary and interest rates will be set accordingly.  If you are a homeowner then you can put your house against the loan.  This will bring down your payments and give you a lower interest rate, but you will need to ensure you do not miss any payments, otherwise your home will be at risk.