What are Personal Loans?
Personal loans are there to help you pay for those things which might cost that little bit more. They tend to range from £1,000 to £25,000, but, there are lenders and brokers who will be able to find you a loan for higher if you have an excellent credit score (upto £35,000). Therefore, enabling you to afford the larger purchases quickly. One of the good things about personal loans is the time they take. The process is always fast and takes a maximum of a few days. This is if you are accepted by the lender or broker. Unlike secured loans, these loans are based on an agreement that the borrower pays it back over a set time period in fixed monthly repayments. Repayments are usually over a period of between 1 and 6 years. But, this depends on your personal circumstances, like your income and your outgoings.
What are their main uses?
Hence the name, personal loans tend to be for personal use. This means that you can use them for anything, in moderation. We don’t advise that you spend your loan on things that aren’t essential. For example, the newest iPhone. Although, if you can afford to do it, why not? Usually, personal loans are used for those important things which cost more, here are a few examples:
- Medical Purposes
- Debt Consolidation
- Home Improvements
Is there anything I shouldn’t use personal loans on?
Yes, just like any other loan, there are things you shouldn’t spend them on. From an expert in the industry, spending your loan on things which you know you shouldn’t only place you in a harder situation in the future. Here are a few examples of things which aren’t right to spend a personal loan on:
- Starting a business
- Taking out a loan for others
- To meet monthly bills
Am I eligible for a personal loan?
We cannot speak on behalf of every lender in the UK, but, the criteria doesn’t differ too much to give you an example. Usually, they follow the same structure as each other, for example:
- Be over 18 years old & a UK resident
- Have a bank account and an active debit card
- Be in permanent employment or receiving various allowances
- Meet our credit and affordability criteria.
- Agree to provide accurate information about yourself and your financial situation
Should I use a broker or a lender?
There are multiple as to why you should use a broker or a lender which support each side. But, just like anything else in the world, people won’t agree on one. Although lenders are great, we believe that there are more positives to a broker. With a broker, you are able to complete and submit one application and that is sent to multiple lenders, increasing your chances of getting accepted and shortening the amount of time and stress it may cause you. This is perfect if you are wanting to borrow money for an emergency or even if you just need the money quickly. Whereas with a lender, your application might be rejected meaning you have to complete another one and you could end up completing hours worth of applications before you’re accepted.
Alternatives to personal loans:
The most common alternative which people like to use is credit cards. Although, if you are looking to borrow a sum of money over a fixed amount of times you should be aware that personal loans tend to be cheaper. You should bear in mind that credit cards don’t normally offer over £5,000, so if the amount that you need is more than this, a loan may be the better option for you. As well as this, saving is the best alternative as it doesn’t cost you any extra money (interest). If you want any saving tips, read our most recent blog on creating the perfect budget for you.