Guide to Personal Loans

A personal loan is money lent to an individual for a specific, non-business related reason. Personal loans are granted by banks, building societies, lending companies, and online lenders. There are two basic types of personal loans, secured and unsecured. Simply put, secured loans require collateral, while unsecured loans do not.

When you are granted a personal loan, you are expected to repay the loan amount within a specified amount of time. Typically, personal loans are repaid by making monthly payments until the loan is completely repaid. Loan payments cover both the balance due on the loan and the interest due.

Personal loans are granted in varying amounts, from 500 and up. Loan terms vary as well and can range from a few months to 10 years. Lenders make money by charging borrowers interest on the loans granted. Interest rates are based on a number of factors, and can be fixed or variable.

Frequently, lenders ask potential borrowers how they intend to use their loan money, if their loans are approved. Usually, the purpose of the loan does not influence whether or not the loan is approved. However, the purpose of the loan can influence the term of the loan. For instance, while automobile loans are often granted with a loan term of about three years, larger loans, such as those granted for home improvement, carry a longer term, often as long as 10 years.

Where to Look For a Cheap Personal Loan

Finding places to look for a cheap personal loan is not at all difficult. There are many banks, finance companies, and online lenders that offer cheap personal loans. As with so many things in life, shopping around and making a careful comparison is key to finding the cheapest personal loan.

All too often, individuals act on impulse, accepting the first loan offers they receive. This is a huge mistake, as rates and terms vary depending on the lender, and they often pass up far better deals in their haste. To avoid falling into this trap, be sure to request quotes from several lending institutions and compare them carefully to ensure you get the cheapest loan possible.

Often, people look only at the interest rate in determining whether or not a loan offer is cheap enough. However, many lenders charge extra fees, such as loan arrangement fees and early repayment fees, driving up the overall cost of the loan. Instead of looking just at the interest rate, be sure to factor in all fees when making your final determination of which loans are the cheapest. Always remember to read the fine print as well.

Generally, the cheapest loans are those that offer low, fixed interest rates and do not include loan arrangement or early repayment fees. Though finding these loans may take a little digging and comparing, you will be saving yourself hundreds by taking the time to do just a little research. Don't be afraid to ask questions and discuss loan rates and terms with a loan officer or customer service representative. Having all the facts will give you the confidence to make the right choice.

By Luke Ashworth www.accepted.co.uk

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