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.