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Frequently asked questions

  • What different types of loan can I compare?
  • What are the pros and cons of unsecured personal loans?
  • What are the pros and cons of homeowner loans?
  • What is a ‘repayment term’?
  • What do I need to compare loans?
  • Will applying affect my credit rating?
  • What do I need to do to get a loan?
  • How can I compare loans?

What different types of loan can I compare?

  • Personal loans: Also known as an unsecured loan, this is based on your personal circumstances, such as how much you earn and your monthly outgoings, as well as how good you have been at paying debt in the past. This means the interest rate you get offered may be different from the advertised rates. Most financial providers offer loans up to £25,000 and repayments are usually spread over a fixed period up to 10 years.  

Here’s an example of a personal loan:

Amount borrowed - £7,000
For how long? - 3 years
Interest rate APR - 9.7%
Monthly repayments - £233.56
Total repayment - £8,048.03
Cost of loan - £1,048.03

  • One particular type of personal loan is a debt consolidation loan. If you have outstanding debt in different areas that you're struggling to pay, e.g.an overdraft, credit cards or store cards, this type of loan could be used to bring these together into one outstanding amount, with one monthly payment instead of multiple payments. You use your loan to pay off the creditors and then just repay the loan. This can help simplify things and reduce your monthly outgoings. You could potentially end up paying less interest, but it could be more if you repay over a longer period. Ideally, you should get free debt advice before taking out a debt consolidation loan.

Find out more about debt consolidation loans 

  • Car loans – You can get a personal loan that’s tailored towards buying a car. Remember to check whether the loan is secured against the vehicle or not. Some lenders will expect this and if you don't keep up the loan repayments, then they could seize your car.
  • Homeowner loans: This is secured against your property, so that you must be a homeowner (either own outright or have a mortgage) to be eligible. They can also be known as second mortgages or home equity loans.  These loans can be up to 25 years and may let you borrow up to £100,000. It’s worth knowing that if you don’t keep up your repayments, then your property may be at risk with this type of loan

Here’s an example of a homeowner loan:

Initial borrowing - £100,000
Repayment term - 25 years
Headline APR - 3.7%
Monthly repayments - £508.09
Total repayment - £157,427.88
Cost of loan - £52,427.88

Remember, in addition to the loan costs you may have to pay additional fees. You can see the total cost when you compare homeowner loans.

What are the pros and cons of unsecured personal loans?

Advantages:

  • It’s an unsecured loan – so you can get one without any collateral, such as your house.
  • Widely available from most financial providers – the application process is quick and easy.
  • Different loans available for particular uses – some loans are tailored for specific purposes such as buying a car or debt consolidation, while others can be used for more general things like home improvements.  
  • You can usually borrow more than on a credit card – you may be able to borrow more than your credit card limit and for a lower rate of interest.
  • Choice of repayment periods – there are options about how long you can take to repay the loan.
  • Fixed repayments – as interest rates are generally fixed, you will know what you need to pay back every month for the period of the loan, which helps with budgeting.

Disadvantages:

  • Requires a good credit history – as there’s no collateral, the bank needs to minimise its risk.
  • Interest rates can be high – to off-set the risks banks tend to charge more for personal loans.  
  • Full early repayment charges – if you repay early you will probably have to pay a penalty. You should be allowed to make partial overpayments if it’s under £8,000 per year, if your debt was taken out after 1 February, 2011.
  • Lenders have minimum loans – most banks won't lend less than £1,000 or for less than a year, so it may not be suitable if you are looking for a small amount. 

What are the pros and cons of homeowner loans?

Advantages:

  • You can borrow more than a personal loan - secured loans are available for up to £100,000. Secured loans typically start at £10,000.
  • Could be a good choice if you have a bad credit history - as your property acts as security.
  • Longer repayment periods – are available and this can mean lower  monthly payments that make it easier to manage.

Disadvantages:

  • You could lose your home – if you can’t keep up repayments.  
  • Early repayment penalties - could increase the cost of borrowing.
  • They can have variable rates - which can land you in trouble if interest rates go up in the future and you cannot afford the higher monthly payments.
  • Longer repayment periods – as you are paying back over a longer time, your total costs over the whole period of the loan can be higher
  • Arrangement fees – some secure loans come with expensive arrangement fees – so make sure you take this into account when weighing up the overall cost. Costs will be included in the APRC (annual percentage rate of charge) which you can use to help compare secured loans.

What is a ‘repayment term’?

This means how long you have to pay the loan back.

The repayment term varies between personal and homeowner loans.

Generally, personal loans tend to get paid back between 3- 10 years. But remember the length of the loan will affect the total amount you are charged in interest. A longer loan may give you more affordable monthly payments but cost more overall.

For example, with the loan shown earlier, compare the monthly rate and the overall cost of the same loan £7,000 over two different loan periods.

3 years

Amount borrowed - £7,000
Interest rate APR - 9.7%
Monthly repayments - £233.56
Total repayment - £8,048.03
Cost of loan - £1,048.03

5 years

Amount borrowed - £7,000
Interest rate APR - 9.7%
Monthly repayments - £146. 31
Total repayment - £8,778.50
Cost of loan - £1,778.50

If you are looking to borrow for a shorter period of time, it may be worth considering whether a credit card is an option. If you are buying something, then an interest-free purchase credit card may be suitable, depending on your circumstances. But check the details carefully so you know how long the interest free offer lasts for.

Homeowner loans are usually offered over a longer period, between 5 and 20 years. 

You should check with your chosen provider what repayment terms they offer before you proceed with an application.

What do I need to compare loans?

Nothing, it’s simple. We’ll show you available loans, once you enter:

  • How much you want to borrow
  • Over how long
  • Or your monthly repayment budget

When you compare loans with us, you can quickly review information to find the loan that’s right for you, such as:

  • Provider
  • Product
  • Representative APR
  • Total amount repayable  
  • Monthly repayments 

Will applying affect my credit rating?

While searching and comparing won’t affect your credit rating, each time you’re refused an application for a loan it may impact your rating. 

We recommend that you only apply for loans that you’re confident you’ll be accepted for.

What do I need to do to get a loan?

To apply for a loan, you need to meet certain requirements. This can vary from lender to lender, but generally, you’ll need the following:

  • Be 18 or above – for some lenders it may be 21 and some lenders also have upper age limits too
  • An income (job or benefits)
  • A valid UK address
  • A valid bank account

How can I compare loans?

We’re here to help you compare loan information. Our easy to use comparison service will let you choose from a list of loans that match your criteria in a simple, clear table for easy comparison.

For each loan available, we’ll highlight all the key features, as well as let you know what you need to apply. Just fill in the amount you would like to borrow to see the available options straight away.

Find out more about how to compare interest rates and what APR means.
 
Make sure you compare the terms and conditions of each loan. And before you apply for a loan, ensure you only borrow money that you can afford to pay back and that you understand what happens if you’re unable to repay it. 

A simples guide to loans

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