The truth about personal loans. Right for you?
Find out whether an unsecured loan is right for you…
There are a lot of myths that surround the topic of loans. If you are at the stage of considering applying for a loan you will find that everyone you talk to has a different story to tell. It can all end up being so confusing that you are put off the idea of ever applying for a loan, even if it would really help you out financially.
This article aims to debunk some of those myths so that you are clear on what you can and can’t do with a loan, and can decide whether or not a loan is right for you.
We will look at:
- What you can use a personal loan for
- What happens if you use the loan for something else
- Whether it is possible to repay a loan early
- Whether you can get a loan if you have a poor credit history
What can you use a personal loan for?
Most personal loans can be used for anything you choose. Our recent article Top Ten Reasons for an Unsecured Personal Loan gives examples of why people take out loans. Two of the main reasons are debt consolidation and repaying credit cards; two purposes that may have been frowned upon in the past by some lenders but are now common reasons to take out a loan.
Other reasons include home improvements, purchasing a vehicle, a holiday or other luxury item, family events, house move, home emergencies or medical expenses.
So there are few limitations on what you are able to take out a loan for. Nevertheless many people still feel a bit embarrassed about anything to do with money or loans. But they are now an integral part of everyday life. For example, in the UK during 2017, a total of £191 billion was borrowed in the form of personal unsecured loans, car finance, short-term loans and credit cards.
If you are considering taking out a loan, it is important to understand the difference between a secured and unsecured loan. A secured loan means that you need to agree with the lender that an asset – typically your home, or in the case of a logbook loan, your vehicle – will provide them security for the loan. This means that if you are unable to repay the loan and no other solution can be found, the lender will be able to use your asset to get their money back.
An unsecured loan is a loan that is not secured on any asset, so there is no danger of losing your home or vehicle.
What happens if you use the loan for something else?
Unless there is any small print in your loan agreement stating that the loan has to be for a specific purpose then you are able to use it as you wish.
But let’s sound a note of caution here. You need to remember that a loan is a debt: a debt that needs to be repaid. Taking out a loan should be a carefully considered decision rather than one you take lightly. If you take out a loan and then find that you don’t need some or all of the money for its intended purpose, the best thing to do is to repay that loan as soon as possible rather than risk frittering the money on something else and remaining in debt.
Is it possible to repay a loan early?
Leading on from the above, when you take out a loan it is important to fully understand all the details about the repayment of that loan. Your loan will usually be for a fixed period of time, for example 18 months. But you need to find out whether it would be possible to repay the loan earlier than that time and whether there would be any charges for this. Some lenders may charge a fee for early repayment.
So when taking out an unsecured loan, make sure you understand how long the loan is for, how much the monthly repayments are, and whether you would be able to repay the loan early at no charge should circumstances permit.
Can you get a loan if you have a poor credit history?
It can be difficult to get a loan if you have poor credit history, particularly an unsecured loan. Some lenders are unwilling to take the risk in case you are unable to repay the loan. This can seem unfair, particularly if you are now back on your feet financially and would be able to afford the loan repayments.
So when looking for a loan, try and find a lender who will treat each case on its merit and look at the whole picture rather than adhering to rigid algorithms. No reputable lender should encourage you to take on more debt than you are comfortably able to repay. But a reasonable lender should be willing to base their loan decision on your current circumstances and whether you can afford the loan repayments, rather than past history.
So if the time seems right for you to take out a loan, perhaps for one of the purposes mentioned above, then we hope that some of this information will put your mind at rest.
If you do need a loan feel free to get in touch with us at Loans2Go as we have a range of loans available. You can borrow between £250 and £1,000 (£500 for new customers) over a period of 18 months and repay in weekly, fortnightly or monthly instalments. There are no set up fees and no charges for settling your loan early. We will consider you for a loan even with a CCJ or poor credit history.
If your application is accepted, we aim to get your money into your bank account within 60 minutes of approval.
To find out more, apply online or call us on 0330 400 0403.
Check back here soon for more financial and lifestyle tips from Loans 2 Go.