Securing a personal loan is much easier when you know what options are available to you
By: Jack Mack | Posted: 26th October 2006
When it comes to making decisions that affect the future of your personal finances, the number of options available to you in today's diverse consumer market can be overwhelming. Choosing a personal loan, for instance, can be a daunting task and often, consumers can get mixed up in the financial jargon of such decisions. However, it is vital to keep a cool head in these situations; if you make sure you're aware of key terms and the types of loans available to you, it will be possible make the best decision with the information you have at your disposal.
As a basic first step, it is important to know that personal loans can be either secured or unsecured. There is a crucial distinction between these two loans: secured loans are tied to your house - like a mortgage - so you may be forced to give up your home if you don't keep up with your repayments. Unsecured loans are not tied to anything concrete; but if you fail to make your repayments, you may be credit blacklisted, which means that you will not be able to obtain new credit cards. It can also mean that you will not be able to secure a mortgage either.
When you're looking for a personal loan to suit your specific requirements, it is important to shop around before you make your decision. Consumer UK loans comparison sites provide a valuable service by allowing consumers to browse the market online to see what deals are available. And while personal loans, can often be secured from well-established banks the personal finance market has expanded so rapidly in recent years that a high proportion of personal loans are now offered from private loan companies and even supermarkets.
When shopping around for a personal loan, make sure that you pay attention to the way in which different loan providers calculate the annual percentage rate (APR). The APR determines the rate at which you pay back your loan, and lenders often use different formulas when calculating APR; so what may seem like a low APR in comparison to another may actually be a deceptive figure. When it comes to repaying your loan, payments are usually made in monthly instalments, over a length of time agreed with your bank. This amount of time tends to be fixed; but remember that the longer the amount of time you pay your loan over, the greater the amount of interest you will pay. If you take out a flexible loan, however, you can generally make your repayments when you choose; as a result, flexible loans are becoming more common, but the amount of interest you have to pay is higher.
Always remember that if a bank or building society rejects your personal loan application, they are legally obliged to tell you their reasons for doing so; and if you want to delve further into the matter, organisations like Citizens Advice and the Consumer Credit Counselling Service are always on hand to help.
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