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Whether it’s buying a new car, or funding some home improvements, a personal loan can give you the flexibility to stay on top of your finances.

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Loans Explained

A personal loan, sometimes known as an unsecured loan, is one made between an individual and a lender without the need of an asset to borrow against.

Typically personal loans range from £1,000 to £35,000 with a loan term of 12 to 36 months. The exact amount you can borrow will depend on the lender, your personal circumstances and your 'credit-worthiness'.

Personal loans are very versatile and can be used for many reasons, some examples include: debt consolidation, home improvements, a car purchase or even a holiday.

A secured loan requires the borrower to offer an asset (usually their property) as collateral in the loan agreement. This means that if the borrower fails to make their repayments, the lender can then repossess the asset to cover what's owed. Because of this security, lenders are usually willing to offer higher loan amounts compared with unsecured lenders. The increase risk to the borrower is obvious however a secured loan may give them access lower interest rates. Secured loans can also be a good option for people with poor or little credit history.

The Annual Percentage Rate (APR) is the annualised interest rate charged on a loan. It represents the overall cost of borrowing over a one year period and is expressed as a percentage. As well as the interest, it includes any additional fees attached to the loan, and it helps consumers understand and compare loans more easily.

To calculate how much interest you will pay on loan you can use the following formula:

Total Interest = (Principle Amount) x (APR) x (Loan Term)

Let's say you're considering taking out a loan of £10,000 for 3 years with an APR of 5%. This is how that would look:

Total Interest = £10,000 x 0.05 x 3 = £1,500
Total Repayable = £11,500

Keep in mind that this is a simplified example and the actual APR will vary based on the loan terms and your personal circumstances. When you search with LowRateLoans.co.uk we will calculate the total amount interest repayable, meaning you don't need to work this out yourself!

What is a personal loan?

A personal loan, sometimes known as an unsecured loan, is one made between an individual and a lender without the need of an asset to borrow against.

Typically personal loans range from £1,000 to £35,000 with a loan term of 12 to 36 months. The exact amount you can borrow will depend on the lender, your personal circumstances and your 'credit-worthiness'.

Personal loans are very versatile and can be used for many reasons, some examples include: debt consolidation, home improvements, a car purchase or even a holiday.

What is a secured loan?

A secured loan requires the borrower to offer an asset (usually their property) as collateral in the loan agreement. This means that if the borrower fails to make their repayments, the lender can then repossess the asset to cover what's owed. Because of this security, lenders are usually willing to offer higher loan amounts compared with unsecured lenders. The increase risk to the borrower is obvious however a secured loan may give them access lower interest rates. Secured loans can also be a good option for people with poor or little credit history.

What is a APR?

The Annual Percentage Rate (APR) is the annualised interest rate charged on a loan. It represents the overall cost of borrowing over a one year period and is expressed as a percentage. As well as the interest, it includes any additional fees attached to the loan, and it helps consumers understand and compare loans more easily.

How is APR calculated?

To calculate how much interest you will pay on loan you can use the following formula:

Total Interest = (Principle Amount) x (APR) x (Loan Term)

Let's say you're considering taking out a loan of £10,000 for 3 years with an APR of 5%. This is how that would look:

Total Interest = £10,000 x 0.05 x 3 = £1,500
Total Repayable = £11,500

Keep in mind that this is a simplified example and the actual APR will vary based on the loan terms and your personal circumstances. When you search with LowRateLoans.co.uk we will calculate the total amount interest repayable, meaning you don't need to work this out yourself!

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Some frequently asked questions...

Can I get a loan if I have poor credit?

Yes, however a poor credit score will certainly affect what loan offers you are eligible for. For higher loan amounts you might want to consider a secured loan instead of a personal loan. You could also look at ways to improve your score before applying for a personal loan.

Does searching for a loan impact my credit score?

If you apply using a comparison service like ours then your credit score will not be impacted. Just make sure the website you use guarantees a 'soft search'.

How can I get the cheapest loan offers?

In order to obtain the cheapest rate on a loan it's best to shop around. Use comparison sites like ours to see what offers are available to you. It might also be worth checking your credit report to see if there is anything you can do to improve your credit score.

How much can I borrow?

Unsecured loans are available for amounts up to around £25,000 whereas secured loans can go up to £250,000. The amount you can borrow as an individual will depend on other factors such as your credit score, personal circumstances and the value of your house/asset.

How much interest will I pay on a loan?

The amount of interest you pay on a loan will be determined by the APR (annual percentage rate). The rate that you are offered will depend on several factors. These include the loan amount, the loan period, your creditworthiness and also whether the loan is secured or unsecured.

What can I use a personal loan for?

Personal loans are very versatile and can be used for a number of purposes. Some typical uses include debt consolidation, a one-off purchase, home improvements or a new car.

What is a soft search?

This means that your credit score won't be impacted, even when carried out multiple times. A single hard search won't affect your credit score, however multiple hard searches over a short period can affect a lender's decision to lend to that customer.

What's happens if I miss repayments?

Missing loan repayments will often incur fees and additional interest that you will owe to the lender. It's also likely to negatively impact your credit score.

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