| Most of us have been in a position at some point | | | | borrower's property. This allows the lender to take |
| when we simply have had insufficient funds to pay for | | | | ownership of the asset should loan repayments be |
| something. This could be car insurance/repairs, course | | | | jeopardised. Whilst the prospect of losing your home |
| fees, holiday, Christmas presents, electrical items or | | | | may seem like a major disadvantage, the benefits of a |
| even the weekly shopping. According to Credit Action, | | | | secured loan often allow you to borrow more money |
| 2.4 million personal loan agreements were recorded in | | | | at a lower rate of interest. |
| the first quarter of 2005, totalling £13.5 billion. The | | | | Despite such benefits however, most people are |
| national debt education charity reported that 30% of | | | | reluctant to lose their home and therefore take out |
| the personal loans were for cars, 24% for home | | | | unsecured loans because of this. |
| improvements and 20% for debt consolidation. The | | | | When reviewing personal loans and researching the |
| total outstanding balance for personal loans reached | | | | cheapest loan on offer, you should be aware that you |
| £93 billion by March 2005. | | | | need to investigate the terms and conditions, as well |
| Personal loans can help you out of a difficult period | | | | as the annual percentage rate (APR). Note that if your |
| when cash-flow is restricted, but don't go for the first | | | | credit history is poor - then the terms of the loan may |
| one you find or you may find that your loan becomes | | | | reflect this. Do your homework on redemption |
| a lifetime commitment and lifetime strain. There are | | | | penalties and any other charges which might be |
| numerous personal finance comparison websites | | | | associated with your loan. Some lenders will also offer |
| available for personal loans including moneynet, | | | | payment breaks (deferred payment) either at the |
| moneyfacts and lowermybills. | | | | beginning of the loan period, or perhaps during the term, |
| In their consumer loans guide, moneynet advise that as | | | | but again read the terms and conditions and check |
| a general rule of thumb, the more you borrow - the | | | | that excessive interest will not accumulate over any |
| cheaper the rate of interest. For example, a loan of | | | | break periods. |
| £1,000 may carry an interest rate as high as 20% | | | | Personal loans in the UK are governed by the |
| - reportedly justified by the lenders because of the | | | | Consumer Credit Act 1974, but remember that you |
| relatively high administration costs associated with | | | | are ultimately responsible for borrowing a given sum of |
| arranging a loan. For larger personal loans, lenders | | | | money and that once you sign a credit agreement, |
| might only charge interest rates of around 6%. | | | | you are bound by the terms and conditions. |
| Personal loans fall into two categories: secured and | | | | If you are finding the repayments challenging, always |
| unsecured. Unsecured personal loans are the most | | | | tell the lender as soon as possible and remember that |
| popular, as secured loans may jeopardise the | | | | any loan repayment problems are likely to be captured |
| borrower's property or other asset. Secured loans are | | | | in your credit record/history, which will later impact on |
| arranged on the assumption that the borrower puts up | | | | any other borrowing. |
| a form of security to the lender, typically the | | | | |