Choosing a Personal Loan That Suits you

By: Jo Godden

The demands of modern life frequently push people to borrow funds through taking loans. The settling of debts, improvements to the house, school & college fees & business plans are all burdens that require additional financial clout. Although loans merely help to make the impossible possible, it's important that the numerous packages within the industry are contemplated attentively.

Personal loans are unsecured loans that are designed for people who want to borrow up to ?25,000 over a fixed term. This means that the loan company has not secured their investment against any pre-existing home or shares that the borrower may have. This is a risk for the loan company, so it does mean that the rates of payment are likely to be slightly bigger than on a secure loan, reflecting the nature of the gamble.

Natwest and RBS offer personal loans with an APR of 6.9% & a repayment period of between one & five years. The customer has the ability to borrow between ?1,000 & ?25,000 & the application process can be simply started online. Flexible loans may also be considered as they offer more choice to make payments in a less stringent manner. Usually, these types of loans are relevant to new companies as cash flow can vary wildly. Natwest & RBS also operate these types of loans and offer a wide variety of options that make the loan procedure more manageable. Because of the risk involved, a borrower's credit score can impact the price of repayments.

A credit history score is calculated using a mathematical formula and by comparing the spending and repayment habits of borrowers to see how much risk is involved in lending to an individual. A good history will generate a good credit score, and vice versa. Those with bad credit ratings can expect to pay higher rates of interest where repayments are concerned, but it is not always feasible to find out what that rate is until after application for a personal loan. It appears to be best for the borrower to take on a smaller loan that can be paid off as quickly as possible.

A large loan taken out over a number of years may keep the rate of the repayments down, but the actual sum of interest repaid over this period will be more costly than if the borrower were to borrow the same sum over a shorter term. Those with existing loans can be tempted to switch their cover to a lender offering less costly rates of interest. Yet again, this is worth investigating, as there can be penalties incurred for leaving a lender which, when taken into account with the new, lower fees, can make the consumer no better off than before. It would additionally be wise to make use of an online loan calculator to get a better idea of the propositions scale. You can find calculators on the websites of most loan providers (on the A&L personal loans page for instance) or on loans comparison sites like The Fool. There is also one on Guardian Unlimited.

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Personal Loans
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