Many people in the UK find the need to take out a loan at some point in their lives. Whether it’s for a new bathroom, a new car, a holiday or perhaps to pay off other debts, there are many institutions out there that will lend you money.
It’s possible to find banks that will lend up to £25,000, but £15,000 is a more typical maximum amount, and you can have the money in your account within just a few days of applying – as long as you can satisfy the lender that you can repay the debt.
The repayment period can vary from 6 months to about seven years, or in some cases even ten years, and the amount of time you pay back the loans will dictate the amount of interest you ultimately pay. Obviously, the quicker you can pay back your debt, the less interest will accrue. However, some lenders will charge a penalty to those who wish to repay early, so be sure to check the terms and conditions regarding repayment before you borrow.
Interest rates tend to be fixed for the period of the loan, which means that you know the exact amount you will be paying back each month. The downside is that if a new loan with a lower rate of interest becomes available later on, you’ll be stuck with the higher rate. Bear in mind however, that the rates will vary from lender to lender, so it’s definitely worth shopping around to get the best deal.
When you apply for either an unsecured or secured loan, the lender will run a credit check against you, in order to ascertain whether you have any bad credit history or unpaid loans. Although a poor credit history will probably count against you in the eyes of many lenders, there are now a number of companies that specialise in loans for those with poor credit history. You will, however, normally have to pay a higher rate of interest. Those who are self employed or work on a contract basis may also have greater difficulty in getting loan approval.
If you are finding it hard to get a loan, don’t be tempted to go to a small firm that apparently refuses no one. Such companies tend to offer loans with very high interest rates and, as the loan market is not highly regulated, you could end up borrowing from a ‘loan shark’ type lender.
One option to consider when taking out a loan is loan protection insurance. This will cover your loan repayments, if you should find yourself unable to pay for some reason, for example due to unemployment or illness. Consider carefully whether you actually need this and check the small print, as it may not be as easy as you thought to actually make a claim should you need to.
Before taking out a loan of any sort, always do your calculations to ensure that you can afford to pay it off, otherwise you might end up facing many years of financial difficulty.
Adam Singleton is an online, freelance journalist and keen amateur photographer. His portfolio, called Capquest Photography is available to view online.