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Options Available To You For A Personal Loan

If you’re looking to borrow money, be it to fund essential home renovations as well as a brand new car, or even consolidate existing debt Personal loans could be a viable option to consider.

Personal loans usually allow you to take out more money than you’re allowed to do through a credit card and then you pay back the loan over a specific time period with fixed monthly payments. However, they’re not the best option for everyone. We examine the pros and cons of taking out personal loans to decide the possibility of them working for you.

How do I get a loan for personal use?

A personal loan allows you to obtain an amount in one lump to be paid back over a specific period of time generally between 1 to seven years. You are able to take out a loan of any amount between £1,000 to £15,000 however, some lenders may extend the limit up to £25,000. The lowest interest rates are typically for sums from £7,500 and up however, you’ll require a high credit score to get the best offers.

The money you take out is then paid back in regular monthly installments, making it more manageable for budgeting. However, this implies that you must ensure that you have enough money to pay for your loan every month.

They are referred to as secured loans, which means they do not have to be secured by something like your home as a secured loan might be. This means that they have a lower risk since there is no chance of losing your home in the event that you cannot pay your loan on time.

Personal loans: pros and cons

There are numerous advantages to personal loans:

Fixed monthly payments. The amount you pay will not change over the duration of the contract, which can simplify your life for those on a tight budget.

The option of when you will repay the loan. You’ll be able to choose the length of the loans (usually between 1 to 7 years) at the time you apply. the longer the loan term is, the less your monthly payments, however, you’ll be paying more in interest in the long run.

High-interest rates. Personal loan APRs are attractive, especially for sums that exceed £7,500.

Possibility to borrow a bigger amount. You’ll generally be able to take out more money than you can using a credit card which is useful when you’re spending money on costly home renovations, etc.

Good for debt consolidation. Personal loans can be an excellent method of consolidating loans into one affordable repayment by a single provider. If you opt for one that has a lower rate of interest it will also save you money.

No obligation to hold any asset. Personal loans are not secured, so you don’t need to put up assets like your home to secure.

Personal loans: Cons and cons

There are disadvantages to be aware of as well So you’ll have to weigh these up against the advantages:

Higher interest rates for smaller sums. If you need to take out a loan of between £2,000 and £3, interest rates are likely to be more expensive when compared to loans of the amount of £7500 and more. This can make it more tempting to take more loans that you’re not able to be able to pay back.

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Flexible repayments. Contrary to credit cards that allows you to pay a specific amount each month, payments on personal loans are set, meaning you must ensure that you have the funds to pay the amount each month.

It is possible that you won’t get the interest rate you are promised. The loan provider must offer an advertised rate of annual percentage (APR) for at minimum 51% of applicants who are successful This means that those with 49% remaining may receive a better rate. The higher rates are typically provided to those who have lower credit scores, and the best rates are only available to people with excellent credit scores.

Charges for early repayment can be applied. If you pay off your loan earlier, you may be liable for an early repayment penalty that could be equivalent of one to two months of interest.

There are no 0% interest deals. Contrary to some credit cards personal loans don’t offer no 0% interest that means you’ll have to have to pay interest.