What are personal loans?
Personal loans are loans for “personal” uses. Typically smaller than a mortgage but larger than an average credit card.
What are common uses for personal loans?
Often they are used to fund cars and other road vehicles, holidays, house renovations and occasionally to consolidate debts.
Types of personal loans?
They can be separated into two types, secured and unsecured.
A secured personal loan is where you offer up something of value which the lender can take control of if you don’t repay the loan. This can include the item purchased with the loan. Quite often cars are used as the security.
Features of Personal Loans
The length of a personal loan usually ranges from 1 to 7 years.
Interest rates vary widely with secured personal loans usually attracting a lower rate of interest. Interest rates can either be fixed for the life of the loan or variable.
Many lenders have an advertised interest rate but the actual interest rates which they apply to the borrower will be based on their formula which rates the ability and likelihood of the borrower to repay the loan without defaults.
Typical fees include setup fees, monthly account fees and late repayment fees.
Extra features to watch out for
Some loans are very flexible allowing you to make extra repayments into the loan and some even let you withdraw these extra funds if needed.
Where do you get a personal loan?
Most banks and credit unions offer personal loans with specialist finance companies. Banks are typically middle of the road when it comes to competitiveness whilst specialist finance companies can be more expensive. Almost every car dealer will be able to refer you to a lender to purchase a car but to ensure you get a good interest rate you should do your research before stepping onto the car yard.
Mortgage or Loan Brokers can also help find you a loan.
How much can I borrow?
How much you can borrow always depends on your assets, whether the loan is secured and your income situation.
Lenders use a number of criteria to work out how much you can borrow and it can vary greatly between lenders.