If you’re looking for credit to cover an unexpected financial emergency, it’s likely you’ve started to consider taking out a personal loan. But is there a faster way? And which one to pick – short-term or long-term? How to know which one is right if you take into consideration your needs against your repayment affordability?
In this article, the Oyster Loan team look at what a personal loan is and how to find the best credit solution for you.
As one of the most popular forms of personal finance in the UK, personal loans give you access to the money you need in an emergency whenever you may need it.Personal loans are also an integral part of the UK economy. This money is then pumped back into local communities; fuelling economic growth across the country.These loans are taken out specifically for you; in your name and against your own credit history. That means you are also personally liable to repay the money you’ve borrowed.
Why do People take out Personal Loans?
Personal loans are actually a lot more common than people realise. They are frequently used as a fall back in financial emergencies and when you simply don’t have the money upfront to cover a certain expense.
Millions of Brits have used personal loans to:
- Cover large expenses like tax bills, car repairs, and funeral expenses.
- Spread the cost of their wedding.
- Buy home improvements and repairs.
- Visit friends and family abroad.
- Pay for a well-earned holiday.
The main benefit of a personal loan is that you are able to pay for expenses like this upfront then spread your repayments into manageable monthly instalments. TSB reported that 31% of personal loans are taken out for debt consolidation, 25% for vehicle purchase or repair, and a further 3% to pay for holidays.
How much do People Borrow on Personal Loans and for How Long?
Each personal loan provider will have their own terms and conditions for a loan, including the amount you can borrow. Some will let you know the maximum amount you’re eligible for based on your credit history.
Typically you can borrow between £1,000 and £25,000 and pay the debt back over a fixed payment term of between one month and ten years. A short-term personal loan allows you to borrow from £100 to £1,000, while a long-term personal loan allows you to borrow from £1,000 to £25,000. It sometimes goes up to £35,000 as well. It depends on the lender and your borrowing eligibility.
Are they Secured?
The vast majority of personal loans are unsecured. This is of particular importance as it means you don’t need to put up any of your valuable assets as collateral to receive the money. Loans that require security mean that, should you be unable to repay your loan, your lender could choose to repossess your home, car, or any other asset you use as collateral.
Where can I Get a Personal Loan?
Personal loans are on offer by a wide range of different lenders. This could be through your usual bank or building society, however, these loan providers often have strict eligibility criteria and fewer options regarding minimum loan amounts and repayment terms.
Can I Get a Loan Straight Away?
One drawback of personal loans is that many providers are not prepared to lend money in a hurry. If you were to apply through your bank, your application could take days to process before you are accepted or rejected. This can make things particularly difficult if you need to pay a bill or call out a tradesman fast. But there are some private lenders who provide their decision after a few minutes post your application submission.
Do I Need a Good Credit Score for a Personal Loan?
Personal loans through banks and peer to peer lenders almost always require a good credit rating to accept your application.Along with the usual requirements of every lender that you must be over the age of 18 and a UK resident, many banks also state you must hold a current account with them too; greatly limiting your options when it comes to finding the best lender.
Affordability assessments also tend to be much stricter too. Not only must you earn over a certain threshold, but many also demand details as to how secure your job is and how much do you spend every month before they’ll decide to give you credit.
Short-term Personal Loans
Short-term loans are a popular way to gain access to the finance you need without the risk of losing your home. You can generally borrow between £100 and £1,000 with a short-term loan and you have between two months and twelve months to pay the loan and the interest back. These loans still go into your account on the same day (usually, however, it depends on a lot of other factors such as your bank) as your application.
The longer your repayment term is, the smaller your monthly instalments will be. However, it is also important to note that the longer your loan lasts, the more interest you will accrue in the meantime so you may end up paying back more in the long run.
Why do People Borrow Short-term Loans?
These loans are perfect for when you’re in a financial emergency. This fast and short-term form of finance could help you to:
- Pay an overdue bill
- Repair your vehicle
- Cover the cost of medical or dental treatment
- Pay for a loved one’s funeral
- Repair or replace something in your home
- Help you survive an unexpected delay in income
Get a Personal Loan that Works for you
Here at Oyster Loan, we’re not lenders. We are a credit broker. That means we are here to help you find the best loan deal for your circumstances.Thanks to our close relationship with all our lending partners we know exactly what it is they look for in a borrower. When you fill your details into our smart computer system, we’re able to match you up with the lender most likely to accept you for credit within just seconds.
We can help you find the lowest possible price for the loan you need. You will know exactly how much you’ll need to repay each month and how long for with absolutely no hidden costs or fees.