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Personal Loans

If you need to borrow money you owe it to yourself to seek out the lowest interest rate and most appropriate loan product.

If you have held a bank account for a number of years with your salary paid direct to the account it should be relatively easy for your "high street" provider to assess your credit worthiness and offer you an unsecured personal loan.

Personal loans are an appropriate product to cover the costs of consumer durables (e.g. carpets/furniture/white goods) and vehicle purchase. It is possible to borrow for a car over a 5 year period with the final payment linked to the expected residual value of the car. This is called a balloon payment and can be a useful feature to reduce the actual monthly repayments provided the balloon amount is realistic and in line with the future value of your car. The idea is that the sale value of your old car repays the loan and then you take out a new loan structured on the cost and expected future value of the new car . For most purchases the personal loan repayment period is usually 3/5 years with loan amounts from £1000 up to £25000

If you own a house, for longer-term loans and for amounts over £15000 a remortgage (secured loan) may be more appropriate. The Banker's UK Property Guide may help.

The Base Rate is a cost of funds benchmark for loan providers determined from time to time by the Bank of England. When you are offered a loan compare the lenders APR (annual percentage rate) to Base Rate current at the time of the quote.

Personal unsecured loans usually range from £1000 to £15000 but can be higher. At the time of writing loans are available between £1000 and £4999 at a rate of 7.6% pa and up to £15000 at a rate of 7.9% pa compared to a Base Rate of 4% at the time of writing. Bearing in mind the unsecured nature of the loan these rates are competitive but if you have access to the Internet search on line providers who have flexible loans with rates as low as 7% depending on your credit status.

Over the last decade the large stores groups have set up banking subsidiaries and Tesco, Sainsbury and Marks & Spencer all offer competitive personal loan rates.

Choose Carefully

Amendments to the 1974 Consumer Credit Act will cover personal loans up to £25000. However the government intends to make it harder for disreputable lenders to take advantage of unsuspecting borrowers. The government's efforts are very timely as consumer spending is spiralling ever upwards with heavy use of credit cards and personal loans. An updated Consumer Credit Act will provide for lenders to give a "cooling off" period enabling the consumer to cancel the loan within two weeks if they want to change their mind.

Consumers will also be entitled to a letter setting out the APR (Annual Percentage Rate) which is the industry yardstick in measuring the true interest rate/cost of a loan. A comparison of the APR is the most appropriate way of comparing loan offers. This is particularly useful if there is a charge for setting up the loan ("an Arrangement Fee") and/or insurance cover charges are part of the transaction. If any of the documents required by the Consumers Credit Act have not been provided then the loan will not be enforceable by the lender.

So be careful when choosing a loan provider and don't be duped into buying expensive life cover and /or sickness, redundancy cover if you don't need these add ons.

Shop Around

Research has shown that three quarters of people seeking loans don't bother to shop around. The cost of being apathetic is high. For example whilst today you can achieve an APR of less than 8% many big name lenders such as Barclays and Lloyds/TSB set their personal loan rates at twice this APR at 15-17% per annum

Fixed or Floating Rates

Personal loans can either be linked to base rate (e.g. Base Rate plus 5% per annum) or fixed at the inception of the loan for the full period. Be careful to ensure that you fully understand whether the quote is fixed or floating. Whilst fixed rates can be useful in budgeting your expenditure you will not get the benefits of any reduction in Base Rate. Also if a fixed rate loan is taken out there will normally be a penalty charge for "early repayment".

Final Word

  • Shop around for the most appropriate deal for you
  • Always check the loan agreement and the small print in newspaper advertisements. Do not forget to find out the APR. An advertised rate of "2.5%" - APR "5.8%" means an effective interest rate of "5.8%" NOT "2.5%"
  • Don't take out insurance add-ons if you don't need them and always ask for an initial quote without the add-ons.
  • Make sure you understand the difference between fixed rates and floating loans. Check for early repayment penalties for fixed rate loans.
  • Don't borrow more than you need and make sure that you can afford the total monthly repayments.
  • Don't use credit cards to fund long term borrowing needs; the rates will always be higher than personal loan products.


Personal Loans

Online personal loans at 5.9% APR typical
Online personal loans at 5.9% APR typical Official site: Alliance & Leicester offer bank Loans at an incredibly low 5.9% APR Typical for loans £5k to £15k. Instant decision online, click here to calculate your repayments.

Norton Finance offer great personal loans online
Norton Finance offer great personal loans online Norton Finance provide personal secured loans. Borrow from £1,000 to £100,000 for any purpose. Easy application and a quick service. Loans are secured on your home. Sorry no tenants

Get a personal secured consolidation loan
Get a personal secured consolidation loan Homeowners only - consolidate all debt and pay less each month with a low-cost secured loan or mortgage. Whatever your situation, we should be able to help. Apply now for a no obligation quote.

UK only - personal loans - Rainbow Finance
UK only - personal loans - Rainbow Finance UK home-owner loans from £3,000 - £100,000 available, no broker fees. Simple 2 minute application. Apply online. A Rainbow UK loan couldn’t be easier. Sorry no tenants.

Homeowner loans from Picture
Homeowner loans from Picture Borrow between £5,000 and £100,000 from a lender who understands you. Rates start as low as 6.9% APR.