Loans
From Personal Finance
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[edit] Secured Loans
These are available to homeowners with the property being used as security. Compared with Unsecured Personal Loans, which are usually for 1 to 5 years and £1K to £25K, they tend to be for larger amounts, generally £100K plus and for a longer term, 5 to 30 years.
These features make the loans particularly suitable for those wishing to borrow larger amounts or for debt consolidation. They have the convenience of lower monthly payments as the amounts borrowed are over a longer term.
Consumers do, however, need to be aware that spreading the debt over a longer term will result in more interest being paid on the borrowing even if rates are the same as Unsecured Personal Loans.
If the borrower defaults on the loan, their home could be at risk or repossessed.
Fees may also be payable.
[edit] Unsecured Loans
Unsecured personal loans are usually covered by the terms of the Consumer Credit Act
A lump sum is lent in return for you agreeing to make regular repayments, usually by direct debit. Personal loans are available from £500 up to £25K. Security will usually be needed for personal loans of large amounts. Personal loans are repayable over a period of time, usually between six months and 10 years.
Lenders charge interest on the amount borrowed. This tends to be fixed at the start of the loan which means that the repayments remain the same throughout the term; however some loans, such as flexible loans, can be variable.
This interest charge is shown as an APR (Annual Percentage Rate). Any firm that lends money is required by law to quote the APR. The advertised typical APR quoted needs to be offered to 66% of borrowers.
The APR usually depends on the amount of the personal loan and sometimes the term as well. This means the best rate for one personal loan amount may not be the best rate on all. Some lenders however do offer the same rate to all their borrowers. You need to check the best rate dependent on the amount and term you are after.
