Banks and building societies offer a wide range of loan products, and if you’ve never been through the process of borrowing before it can be a little daunting. The best product for you will largely be dependent on the purpose of your loan, how much you need and how long your intended repayment period is.
An unsecured personal loan is one of the more common products offered to consumers. This kind of loan is not tied to any property you may own, and should you fail to repay the full amount the only recourse for the lender is to sue you using the district courts.
The reasons you are applying for the loan will determine how much you are allowed to borrow. For example if you were looking to buy a car you would be able to borrow more than if you were looking to book a holiday. The amount you will need to repay will be based on the APR you are offered when you take out the loan. Repayment periods for this kind of loan will vary greatly with the vast majority being no less than 6 months and no more than 10 years. The amount available to borrow also varies wildly, but typically it will be between £500 and £25,000.
Types Of Interest Rate
There are two types of interest rate offered on this kind of financial product. Firstly is a variable rate, which is tied to the Bank of England base rate. When there is a fluctuation in the base rate the APR changes accordingly. This is the riskier of the two choices as you could end up paying more than you would with a fixed rate or you could end up saving money. The other option is a fixed rate, which as the name suggests means you pay the same amount of interest over the course of your repayment period. This is the safer of the two as it allows you to confidently plan your budget based on the amount you will need to pay each month. Both the type of APR you are offered and the rate will depend on your circumstances, but around half of applicants are given the representative APR.
The recent events in the banking world have made any kind of credit difficult to obtain, and unsecured loans are no different. For those with a patchy credit history it could be extremely hard to find a lender willing to take the risk, and even if they do they could find themselves paying way over the odds for the loan as the APR will be adjusted to match the risk profile.
Stuart contributes to a number of finance blogs and writes mostly about unsecured personal loans and similar products.
I'm Louida from Atlanta, Georgia and I'm a mother of two daughters, and a full-time blogger/influencer.
I love helping others learn how to start working from home online free to help supplement their current income.
I also blog at Productreviewmom.com
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