What is a personal Loan?

A personal loan is usually defined as a loan which is awarded for a wide variety of non–commercial personal purchases. Common reasons why people apply for personal loans are due to the need for a car, to pay outstanding bills or to meet immediate money needs. They’re commonly available from a number of financial institutions, such as banks, building societies and independent lending companies.

Personal loans are usually unsecured in nature, which means that they are not secured against the value of your property. Therefore borrowers aren’t risking their home should they find themselves in a position which renders them unable to pay. However the fact that loans are unsecured does mean that applicants are subjected to credit checks; these allow lenders to form an idea of their ability to repay.

Less than perfect credit doesn’t always mean that an applicant will be rejected. The criteria for acceptance is different from lender to lender, and many independent institutions don’t require as high a score as banks and building societies.

less than perfect credit personal loans are usually subject to an interest rate which can vary considerably depending on the lender, the financial climate and the borrower’s credit score. The repayment period can vary too, with payday loans usually only lasting a month and larger personal loans typically taking up to five years to repay.   

In the UK reliable lenders will be regulated by the Financial Services Authority according to the terms stipulated in the Consumer Credit Acts of 1974 and 2006.The UK government also commissioned a free Financial Ombudsman Service to resolve any disputes between lenders and consumers.