What You Need to Know About Personal Loans
When you take out a personal loan from a bank or other type of lending institution, you do not have to provide collateral or secure the loan in any way. Rather, you simply need to demonstrate that you have a good credit rating in order to receive one of these loans.
Good Credit Versus Bad Credit
In order to determine whether or not you have good enough credit to qualify for a personal loan, the lending institution will engage in an investigation into your credit standing. If you have a good credit history, you will be more likely to be approved for the loan and to receive a more attractive interest rate. If you have bad credit, on the other hand, you may find it difficult to get approval. If you are approved, the terms of your loan will be less desirable. For example, you may have to pay a higher interest rate or you may have to make payments on a weekly basis rather than on a monthly basis.
Methods of Obtaining a Personal Loan
In the past, the only way to obtain a personal loan was to actually visit a lender and sit down and discuss your finances. Today, the Internet has simplified the process and made it possible for borrowers to seek loans from lenders that may be physically located far away.
A growing number of Internet sites allow those interested in a personal loan to simply complete an online application with the lender or lenders they are considering borrowing from. After answering the questions, the lender or lenders you applied to will notify you via email whether or not you have been approved.
When choosing from among the various methods of obtaining a personal loan, it is important to consider a number of factors. For instance, institutional lenders and banks often charge a higher interest rate than online companies because online lenders do not have the same overhead costs. At the same time, you may feel more secure obtaining a loan from a lending institution that is nearby and that makes it possible for you to personally speak with a representative when necessary.
Varying Interest Rates
In addition to looking at your credit history in order to determine the interest rate you will be charged, lending institutions also consider the length of the loan, the amount of money you are borrowing, and how much money you were able to put down toward the purchase. Most personal loans mature anywhere from five to 25 years after the loan is approved, meaning the loan has to be repaid within this timeframe. For example, it is not unusual for a loan of £1,000 that is to be repaid in five years to have an interest rate of 20% while a loan of £25,000 that is to be repaid in the same timeframe may have just a 6% interest rate.
Currently, the UK offers more than 70 different lending institutions for you to choose from when seeking a personal loan. With that many institutions to select from, be sure to take the time to shop around and find the one that can make you the best offer.