How to Choose a Personal Loan

A personal loan can be a quick and relatively easy way to borrow money. You don't need to offer anything as security against the loan and a decision on your loan can normally be made in a few days, especially if you have a good credit rating.

So what is a credit rating and how do you know if your credit rating is good?

A credit rating is the assessment of the probability of a borrower to default on a loan.

Banks and other lenders contact credit Agencies who are able to provide information to the lenders, to help them decide your suitability for a loan. The information usually consists of your payment history, a list of past and current credit accounts and any outstanding balances, employment and personal details, and a history of any past credit problems like County Court Judgements or bankruptcy. You can check your credit rating by contacting these agencies-The two major ones are Equifax and Experian, and for a fee they will send you a copy of your credit rating.

Where Do I get My Loan?

There are various options open to you can use a bank, you can apply online to a loan company, or you can use a broker.

Why use a bank?

You may already be known at your local bank and they may handle your other financial matters, so it may be convenient for you. They can offer competitive interest rates, although they do not offer as wide a range of options as a broker may.

Why Apply Online?

It is quick and convenient, and many banks and brokers now allow you to apply online, though you will be telephoned to discuss yoru exact requirements and loan possibilities.

Why use a broker?

A broker usually has relationships with a number of different lenders and can normally match your requirements against their database of lenders and products. They will also offer advice on the type of loan you need to suit your own personal circumstances, particulraly if you have some credit problems. They may charge an arrangement fee.

How much can I borrow?

This depends on the lender but most have minimum of £1000 and a maximum of £35000.

What will be the length of my loan?

Smaller loans can be repaid over 1-5 years. Larger loans can be repaid between 3-7 years.

It is worth remembering that whatever loan you end up choosing, you should make sure it is one that meets all your needs and is affordable.