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Personal Loans



        What is a personal loan?

        What do you need?

        Which type of personal loan?

        Shopping around for a personal loan

        Applying for your personal loan

        Frequently Asked Questions

          Where can I go to get more help?

     What is a personal loan?
How does a personal loan work? A lender such as a Bank,
Building Society or other financial company agrees to lend
you a sum of money - anything from £500 to £25,000 and
upwards, and you agree to pay that amount back plus
interest, using regular payments over a pre-determined
period of time, from between six months and twenty five
years. Your loan repayment amounts gradually repay both
the amount you've borrowed (the principle) and the

        You need to be 18
        years old or over to
       qualify for a personal

Banks and other lenders will usually need a reason why
you require the loan so that they can provide products that
suit you. Most personal loans can be used for any
legitimate purpose.

Some examples of when you might need a Personal loan

                                                a holiday
                                                a wedding
                                                home improvements
                                                to repay other debts
                                                a car

      What do you need?
You know that you need that extra bit of cash, and you've
decided on a personal loan, so now you need to know the
best way to go about it!!

Before approaching a lender try to work out exactly how
much you need to borrow and for how long. Often the
longer the term of a loan, the lower the interest you pay,
but, it may be cheaper to repay the loan quicker at a
slightly higher rate, use the table below to help work out
what you need:

Do you know....                If not, then....
how much you need to           Obtain quotations and estimates for the
borrow?                        item(s) you want the loan for
                               Use our calculator to work out the total
how much the loan will cost
                               cost of your loan using different interest
overall including interest?
how long you need to pay       Use our calculator to work out how long it
the loan back?                 might take to repay your loan
how much you can afford
                               Use our calculator to work out what your
each week, fortnight or
                               repayments might be
month to repay the loan?

     Which type of personal loan?
Despite the growing number of money lenders around, there are really only
two types of personal loan on the market, secured and unsecured. The table
below compares the features and common uses of secured and unsecured

                        Secured Loan                     Unsecured Loan
Description    An asset, usually a property is    An unsecured loan is not
               used to guarantee the loan.        secured against an asset or
               Approval is primarily based on     property. Approval is primarily
               the value of your property         based on your credit history,
               rather than your credit history.   however, If you own a
               Failure to keep up your regular    property you may get
               payments could result in the       preferential terms. Failure to
               lender selling the asset to        keep up regular payments
               repay the loan. This type of       could affect your credit rating.
               loan is also known as a home       This is the most common type
               owner loan.                        of personal loan.
Borrowing          larger amounts up to              smaller amounts up to
features              £50,000+                          £25,000
                   flexible repayment plans          less flexible repayment
                   longer payment terms                plans
                      up to 25 yrs                    shorter repayment terms
                   available if self                   around 5 to 6 yrs
                      employed                        more detailed credit
                   poor credit history                 checks
                      and/or County Court             don't have to own a
                      judgements not                    property
                      excluded                        higher interest rates
                   lower interest rates              fixed interest rates
                   fixed or variable interest

Common              Home improvements                 Holiday
uses                Debt consolidation                Household goods
                    Car Loans                          purchases
                    Larger borrowing over a           Wedding
                     longer period                     Smaller borrowing over
                                                        a shorter period

Note: If you own a property and you want a personal loan for home
improvements seek financial advice as it might be more appropriate for you to
re-mortgage and raise the funds that way instead.

       Shopping around for a personal loan
Knowing how much you need to borrow, for how long, and
whether a secured or unsecured loan is the most
appropriate for you, will make looking for a personal loan
easier. There are so many companies offering loans it can
seem difficult to know where to start, so focus on lenders
who offer the type of loan you're after. The main types of
lenders in the marketplace are:

      Banks
      Building societies
      High street and online finance companies
      Loan brokers
      Telephone based lenders

It is important to shop around and compare interest rates
and loan products to make sure you get the right loan for
you. The following resources can provide a good place to

      high street advertising
      magazines
      newspapers

   In all cases lenders are obliged under
   the terms of the Banking Code (2008)
   to provide a Summary Box of
   information outlining applicable
   charges and interest rates for their
   personal loan products, so consumers
   can make an informed decision before
   they take up an offer.

    Here's an example of a summary box for an unsecured personal loan:

Summary Box Term            Unsecured personal loan example
                            Typical 8.0% APR
APR (Annual Percentage
                            If successful, the interest rate you will pay is based on
                            your personal circumstances and the amount you
                            choose to borrow.
                            Loan size        From %      To     Representative APR
Interest rate ranges                                   16.0%             8.0%
                            £7,500 -          8.0%
                            The interest charged is added to the total loan at the
                            beginning of the loan term. The charge is calculated by
                            applying the agreed rate to the loan balance on the
                            basis that you will be paying part of the loan each
Interest charging
                            month, over the chosen term. This results in a larger
                            amount of interest being attributed in the early months
                            of the agreement than in the later months. The interest
                            rate applicable to your agreement will be fixed for the
                            life of the loan.
                            The first monthly payment is payable 30 days from the
                            date you receive the loan funds, unless you chose to
                            change the monthly payment date. Other monthly
Repayment information       payments are payable on the same date each month
                            until the loan and all the interest and any other sums
                            due are repaid. Payment holidays and deferred
                            payments at the start of the loan are not permitted.
Repayment period            12 - 60 months in monthly intervals.
Amount of loan available    £7,500 - £14,950 in £50 intervals
                            Not applicable
Other fees                  Not applicable
                            Late Payment Fee £15
Default fees                Monthly Arrears Fee £20
                            Default Notice £40
                            We will determine your settlement date and any rebate
                            of interest to which you are entitled in accordance with
                            the Consumer Credit (Early Settlement) Regulations
Early settlement
                            2004. If the agreement is for a term of one year or
                            more, we may charge you one month’s interest to
                            cover the cost of setting up your loan.

Most personal loan interest rates are advertised as APRs,
however, not all lenders calculate their APR the same way,
so for a true comparison look for the TAR (Total Amount
Repayable) and/or the monthly repayment amounts to see
exactly what the loan will cost you. 'Best-buy' tables
published in the media are helpful in that they compare
products whose APR rates are based on the same terms
and conditions.

It also pays to find out about differing lending criteria and
additional loan features by phoning or emailing lenders,
some good questions to ask are:

      Can you take repayment holidays?
      Are there any fees if you want to make additional
       payments onto the loan?
      What would the initial payment be and what will the
       regular payment amounts be?
      What will the total cost of the loan be, including
       interest and charges?
      Do they offer loan repayment protection
       insurance in case you are unable to make your
       repayments in the event of sickness or loss of
       income due to redundancy, and if so how much will
       it be?

Most lenders including high street Banks have online sites
you can use to search and compare personal loan
products. Alternatively if you don't know which lender you
want to use, just doing a search from your home page, for
example typing in "unsecured personal loans" will bring up
several links for you to investigate. Doing a search online
for "personal loan brokers" will also provide several links to
online companies who specialise in helping people to get
personal loans.

There are also personal loan comparison sites available
which enable you to type in what you need and they
generate the best loan products for your circumstances.
You may also get an indication of the likelihood of being
approved in some cases. We've included links to some
independent personal loan comparison sites here for you
to start your search: Compare Loans: Personal
Loans, Secured Loans, Consolidation Loans. Compare unsecured, secured
and consolidation loans.

       Applying for your personal loan
So once you have decided on a loan type and lender, it is
now down to the actual loan application!

Make sure you have all your personal information handy
including your bank account details before you start. Find
out from the lender exactly what type of documentation
they need from you, in most cases all lenders will require
you to:

       provide some form of identification
       provide proof of your home address (up to the
        previous 3 years)
       provide evidence of your income and/or career
       set up a Direct Debit for your regular payments.

As part of the application process lenders will also check
your credit score, this is a score that is given to you based
on your past credit history. If you want to find out what your
credit score is for yourself, you can do this at

       An important thing to remember is
             to only make one loan
         application at a time as it can
       adversely affect your credit score
        if you have multiple applications
        being checked at the same time.

  In addition to the general application requirements above,
  the table below outlines what to expect for different types
  of lenders:

Applying for a
                        What to expect......
personal loan via....
High Street Banks,     After making an appointment, a specialist loans advisor will
Building Societies and take you through the application process step by step. You
Finance Companies      may get a decision on the spot but it can take 24 hours.
                        When you make the phone call your information will be
                        taken over a recorded call, a paper copy of the application
Telephone               will then be forwarded to you for signing. You may get a
                        decision over the phone, but more likely will need to wait
                        until the signed form has been returned.
                        You can compare lenders in your own time online and then
                        use their online application tools and forms, some online
Online loan site        lenders promise instant decisions. Secure websites have a
                        yellow padlock or key icon in the bottom right-hand corner
                        of the page.
                        After an initial meeting, email or phone call the loan broker
                        will search the market for the best deal for you and usually
                        assist with the application. You may incur a charge either
                        up front or one added to your monthly repayment. It is
Loan broker
                        important that you know exactly how much this is. Also
                        check whether the broker is tied to particular lenders or
                        whether they are independent as this may affect the type of
                        offers they provide.

  Once the lender has all the information they require,
  including your signature confirming acceptance of the loan
  terms, the loan amount will be credited to your bank
  account sometimes within 24 hours.

  Remember to keep copies of the loan documents you have
  signed and any related loan repayment protection
  insurance documents in a safe place for future reference.

  Make a note of the date when the first repayment is due
  and check your Direct Debit is working to avoid late
  payment charges. Ensure you make all subsequent
  repayments on time to avoid ongoing penalty charges and
  ensure your credit rating won't be negatively affected.

FAQs personal loans

Here are some frequently asked questions and their answers which may

   What does APR mean?

A:APR stands for Annual Percentage Rate. This is the interest rate that will be
applied to your personal loan, it is calculated as a percentage of what you
borrow and charged as an annual interest charge. So an APR of 8% means
you pay £8.00 per year, for every £100 borrowed. This is an important charge
you should be aware of when selecting a personal loan as the lower the APR,
the less it will cost you. The actual APR you may be offered is dependent on
the amount you borrow and your credit history, and may change during the
term of the loan depending on whether the interest rate is fixed or variable.

   What is a secured personal loan?

A: A secured loan means that your home is used as security against the loan.
Secured loans tend to be easier to obtain, because you are guaranteeing
repayments against the value of your property, and the amount you are
allowed to borrow is usually much higher. This can be useful if you have a
poor credit history or county court judgements against you and applications
for other types of loans have already been turned down. Before taking out a
secured loan it is worth talking to an independent financial advisor to get an
overview of other borrowing options. You might find that it makes better
financial sense to re-mortgage your property, or take out a home equity loan.

   What is an unsecured personal loan?

A: An unsecured personal loan means you do not have to be a homeowner to
apply for one, and that if you are a homeowner, you do not have to secure the
loan against your property. The interest rate of an unsecured personal loan,
although normally higher than a secured loan, will remain fixed for the
duration of the loan, and is therefore easier to budget for and manage,
regardless of external economic fluctuations.

   What if I get declined for a personal loan?

A: Most lenders have an appeal process, the first step is to ask the company
why your application has been declined, there may be several reasons. If it
was as a result of a bad credit reference you can ask the company which
credit reference agency they used and, if you haven't already done so, you
can contact the credit reference agency and check out the credit reference
yourself for a small fee. Sometimes credit information about you is incorrect or
has been affected by someone else fraudulently using your name and
information so it is worth checking this out. If you have been declined because
you don't meet the company's lending requirements you may have to
approach another lender who may have different criteria, or investigate
alternative types of lending.

   As a tenant can I get an unsecured loan?

A: Yes, the only type of loan that you can't get as a tenant is a secured loan
because you need a property to secure the loan.

   What if I fall behind on my repayments?

A: If you find that you are struggling to keep up your repayments, contact the
lender and explain your problem. Lenders would prefer to work out a new
repayment plan that you can afford, rather than start legal proceedings
against you or take it as far as repossessing your home.

   What is a debt consolidation loan?

A: If you have more than one source of debt (such as credit card debts, and
maybe one or two personal loans,) it is sometimes possible to put them all
together into one new loan. You can get the repayments for these
"restructured" into smaller payments per month over a longer period. This can
offer interest savings and make the debt easier to manage. Usually a secured
loan is used to consolidate and pay off unsecured debts.

   What are sub-prime lenders?

A: These are non-mainstream lending companies (i.e. not major banks and
finance companies) who usually advertise on TV and offer debt consolidation
loans, or simply loans that are easy to obtain, whatever your circumstances or
credit score. Loans form these lenders usually have very high rates of

   What are 'flexible repayment terms'?

A: Flexible repayment terms can include the option of taking 'payment
holidays', where you can stop repayments for an agreed period of time. Or
reduced redemption charges - so you won't be charged early repayment fees
if you want to make lump sum payments into your loan or pay the loan back

     Where can I go to get more help?
The following links may also provide additional help and

If you're curious to know what your credit score is you can
check it out for your self at:

To check whether a lender is registered with (and regulated
by) the Financial Services Authority go to the FSA Register

If you need free advice or help with a personal loan debt
contact the National Debtline at
or the Consumer Credit Counselling Service (CCCS) at

The Citizens Advice service can also provide help to resolve
legal, money and other problems via free, independent and
confidential advice, contact the Citizens Advice Bureau at

For consumer and trade information on UK personal loan
policies and regulations contact the British Bankers
Association at

If you have a complaint with a lender and you have been
unable to resolve it directly with the company you can ask for
assistance from the Financial Ombudsman Service at

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