Unsecured personal loans
Unsecured personal loans aren't secured against property, which means they're often suitable for tenants – and for homeowners who don't want to use their home as a guarantee for a loan.
The amount you could borrow will depend on your ability to repay it, and the interest rate you're offered will depend on your credit rating.
Secured personal loans
Taking out a secured personal loan could give you access to larger sums at a lower interest rate (than you'd get with an unsecured loan). It may also mean you can repay the money over a longer period of time, which could reduce your monthly payments, even though it could increase the overall cost of your loan.
Since secured personal loans are secured against property, they're only available to homeowners with enough equity in their home:
Equity equals value of property minus value of mortgage / loan(s) secured against it.
So, if you had a house worth £150,000 and owed £100,000 on your mortgage, you’d have £50,000 of equity in your home.
But that doesn't mean you'd be able to borrow £50,000 – we won't lend you more than you can comfortably afford to repay. Your home could be at risk if you can't keep up with the repayments on your secured personal loan.
Repaying your personal loan
With any debt, the question "How quickly should I arrange to repay?" is a vital part of financial planning. The longer a debt is running, the more interest it will accrue, so:
- Repaying quickly will mean you pay more each month but less in total
- Repaying slowly will mean you pay less each month but more in total
Before you agree to the terms of your personal loan, you should talk to your loans adviser about your income and expenditure, and about any expected changes to your circumstances. Basically, you should aim to repay the loan as quickly as possible, without putting too much strain on your monthly finances.
The overall cost for comparison is 16.9% APR (typical).