The Best Personal Loan For You

When you take out a personal loan you can do whatever you want with the money. You could use it to buy a car or take a holiday. You could pay off all your credit card debts if the loan is at a lower rate of interest and is repayable over a longer period of time.

There are a number of factors to consider then choosing the right personal loan.

Some lenders offer as much as 25,000 pounds but around 15,000 pounds is the norm. Quite often you can get the money in a matter of days following approval in principle by telephone.

The term of a loan will vary and a year is standard, although you could get one for a shorter period of six months. However, if you only require the money for a few months you might as well use your credit card. Seven years is the usual maximum length for a personal loan although you might find a lender prepared to go over ten years.

Personal loans are widely available these days at competitive rates. The usual providers such as banks and building societies have been joined by the major supermarkets and it is advisable to stick with a name you know.

Some smaller companies might offer loans with a costly penalty if you redeem your loan early or move to a company offering a better deal. Normally if you pay off your loan early a reputable firm would only charge two months’ interest.

You need to compare rates and all the other factors, for example you might get the best rate from your mortgage lender but still benefit from using another provider.

Interest rates on personal loans are usually fixed for the duration of the loan so you pay the same amount each month. This is invaluable for your budgeting and you will normally need to pay by direct debit.

In general, the larger your loan the lower your interest rate. The Annual Percentage Rate (APR) is the one to note. This takes into account any arrangement fees due, although not many lenders charge for this nowadays.

Your credit rating will be checked before you can get a personal loan as lenders will need to be sure you are a good risk. If you have a poor credit record you might still get a loan, but it is likely to be at a higher interest rate than normal.

People who are on short-term contracts or the self-employed can find it difficult to get a personal loan.

An unsecured loan demands a higher rate of interest as the lender cannot take possession of your house should you default as could happen with a mortgage loan.

Loan protection insurance covers you if you cannot meet the payments due to health problems or losing your job. Sometimes you cannot get a loan without this insurance, or else agreeing to a higher interest rate.

If you want the insurance check the small print very carefully and find out about any exclusions which might disallow a claim. Consider whether you really need it in the first place as it can be expensive and is only adding to your debts.

According to new laws, the full cost of your interest charges, including any insurance, must be shown in the lender’s APR. Comparison of rates between companies is now much clearer as you can see exactly what is charged.

Don’t Lose Your Home For a Thousand Pound Debt

Following the credit crunch the government has called for protection against people losing their homes, and said that turning families out of their homes should be a last resort. So it beggars belief to learn that you could be forced to sell your house for as little as one thousand pounds of debt as a loan or on a credit card. All that is required is a ‘charging order’ to make this happen.

The use of charging orders, first introduced in 1980 to enable creditors to force borrowers to sell their house if they can’t pay off their debt any other way, has increased by 100 per cent over the past couple of years. That is a massive increase in their use, and of course equates to a massive increase in the number of people losing their homes.

Under the revised terms of the Tribunals, Courts and Enforcement Act 2007, banks would not need a County Court judgement to force someone to sell up in order to repay their debts. Even if the home owner had got official agreement for a repayment schedule through the courts and were adhering to it, the banks would still have the power to force a sale.

The new measures were devised to stop people arranging low monthly repayments and freezing their interest, and then selling their house anyway, thus cannily saving on the loan interest. But the majority of people who have negotiated a repayment schedule and are making regular payments as required just want to hang onto their homes, and they could still be at risk of this draconian law.

Although the revision had received Royal Assent, the Ministry of Justice has decided not to go ahead with the new terms by the time being. But it is not all good news for borrowers because the revision would also have decreed a minimum limit of debt due before a sale could be enforced, and that has also been put on hold.

So that is why it could happen that someone is forced to sell their house to cover as little as 1000 pounds of unsecured debt.

A spokesperson for the Ministry of Justice admitted that, although the revisions to strengthen the Act had been held back to protect borrowers, it was possible that some people would have to sell up to repay fairly small debts.

The Lib Dem Treasury spokesman Vince Cable said, “No one should be allowed to lose their home simply because of a credit card debt. More needs to be done by the government to ensure that lenders simply do not act overzealously, and only take possession of properties as a last resort. The fact that banks can now kick people out of their homes for not keeping up with their unsecured debts is very worrying.”

The Citizens Advice Bureau also said the Act would make it ‘easier for creditors to get their money'. However they would not comment on the Act itself as the minimum limits for charging orders had not yet been set.