Personal Loans - compare loans for great rates

A. A personal loan is a lump sum advance from a loan provider to you. The lump sum can vary from as little as £500 to as much as £25,000. You can choose over what period of time to repay the loan, subject to the terms and conditions of the loan.
Personal loans can be secured, or more normally, unsecured. Secured loans are also known as homeowner loans, as the secured element relates to whether the repayment of the debt is backed by some other asset, usually your home.
The loan provider makes money by charging you interest, which is added to your loan repayments.
Some personal loan providers also offer optional payment protection insurance. This insurance ensures your repayments are continued to be met should you have an accident, sickness, or become unemployed. The loan provider makes money on the commission from the sale of this policy to you. You do not have to take this insurance to take the personal loan.

Q. How do personal loans work?

A. Once approved, the money is deposited in your account either electronically, or via a personal cheque. You agree to make regular monthly repayments until the full value of the loan capital, plus any interest, has been repaid. Most personal loans are at a fixed interest rate, which means that the interest rate you are charged, and by definition the repayments, do not vary over the term of the loan. The most common, and simplest way to ensure you keep up with repayments is to set up a direct-debit from your current account to the loan provider, which minimises the chance of you missing a repayment.

Q. How am I protected?

A. Personal Loans are governed by the Consumer Credit Act. The Act contains strict regulations about how money is lent and covers loans up to a value of £25,000.
When taking out a personal loan you will be asked to sign a credit agreement. Read this through carefully before you sign, as you will be bound by its terms. Some loan providers offer optional insurance policies or payment protection schemes for an additional cost to ensure payments are continued in the event of accident, illness or redundancy. However, cover may vary and you should check with your individual loan provider what a particular policy or scheme covers, or more importantly, excludes.
If you do have difficulty making your repayments, seek advice from your loan provider immediately. The earlier the better and the more sympathetic they will be. Alternatively, you can seek advice from a voluntary organisation.

Q. How am I judged when applying for a personal loan?

A. Judgement criteria vary from one loan provider to another. However, your income and your credit history are the two main criteria. Many loan providers rely on data from credit reference agencies.

Q. Why do Loan Providers put so much importance on a good credit history?

A. When issuing you with a personal loan, loan providers give you credit. They take this risk based on your ability to repay that money. Your credit history shows how you have repaid loans or other debt, including utility bills, credit cards or mortgages, in the past. This is taken as an indication of how you will repay loans in the future.
If you have a good credit history, generally you are considered low risk. A good credit history could help you get more than personal loan privileges. It could also help get loans for those bigger life purchases such as a car or a house. A good credit history speaks well for you. A poor credit history can be improved over time and people have opportunities to make that happen.

Q. Does applying for a loan affect my credit status?

A. Every time you apply for a loan, an inquiry is made as to your credit status. This inquiry is noted with the respective credit agency. Although these inquiries will remain on the report for approximately one year, loan providers will be primarily concerned with the number of inquiries over the last 6 months.
Loan providers can become concerned if there are more than 10 inquiries during that time. They may interpret this as an indication that you are badly in need of credit, and thereby consider you high risk. As a result, they might be less likely to grant you the loan you are applying for.

Q. I’ve had credit problems. Can I still qualify for a personal loan?

A. There are some loan providers on our database who are willing to consider applications from people who have had credit problems in the past. Interest and other charges are often higher, reflecting the increased risk. If you are in this position, while using our Compare and Contrast loan search engine, select the CCJ/Arrears specialist lender as being an important loan feature for you. This will help us find lenders who provide this service.

Q. What is a non-standard lender?

A. A non-standard lender provides finance to those who may otherwise have difficulty obtaining credit.

Q. How do I check my credit rating?

A. First of all, you need to understand how the system works. Remember that you do not have a right to credit, and before giving you credit lenders, such as banks and loan companies, want to check that you are an acceptable risk. To help them do this, they check with firms called credit reference agencies (CRAs) to get details about you and your credit record. These agencies have records of almost every adult in the UK.
You can write to the two main CRAs for credit information at the following addresses:
Experian, PO Box 8000, Nottingham NG1 5GX, tel 0115 976 8747
Equifax, Dept 1E, PO Box 3001, Glasgow G81 2DT, tel 0990 783783.
You must send a cheque for £2 (made payable to Experian or Equifax), your full name and address and any addresses you have had in the last six years (this helps the agency to track all the information it has on you). If you run a business, give its name and address as well, because separate information could be held on you under your business.

Q. What is an affinity loan?

A. An affinity loan is a personal loan that is associated with a particular, often charitable, cause. A donation is made to the charity when you are issued with the loan and a small percentage donation will also go to the charity for every transaction you make on the loan. Many companies and organisations form an affinity deal with a major loan provider, as they do not have the resources or expertise to launch their own product, but want to offer the service to their customers. An example might be a football club wanting to offer personal loans to its fans.

Q. What is a homeowner loan?

A. Homeowner or secured loans differ from unsecured loans in that your home or property is used as security. If you have a mortgage, repayments on your homeowner loan are made in addition to your mortgage payments. If you stop making repayments on the loan, the loan provider has rights over your home. Please note that Tesco Compare are unable to offer a comparison service for homeowner loans.

Q. What is a guaranteed loan?

A. A guaranteed loan is one where the loan provider uses information it has about you and your financial record (usually through an existing account relationship) to decide that you qualify for the loan before you apply. This is done to encourage applications, as one reason you may be hesitant is the fear of being turned down. You are normally advised of the guarantee in a mailing campaign, the hope of the loan provider being that this fact increases the number of people who reply to the offer.

Q. What is an unsecured loan?

A. This loan does not require an asset to be nominated as security. If you fail to keep up with repayments, the loan provider will have to undertake legal proceedings to recover the money.

Q. How are interest charges calculated?

A. The interest is calculated in two basic ways. Either the total interest due is calculated up-front, and added to the loan advance, or is calculated on an ongoing basis, either daily or monthly, based on the capital outstanding at that time. Repayments are simply the total of interest and capital divisible. The two methods make no material difference to the amounts paid by you to the loan provider.

Q. How do I make my repayments?

A. There are three principle ways in which your loan could be repaid. The most popular way is to set up a direct debit from your own bank account to the loan provider. Alternatively, you may be able to pay by cheque every month. Lastly, a small number of loan providers still allow payments to be made in cash to a branch.

Q. How can I make sure I never miss a repayment?

A. Set up a direct debit to ensure that the monthly payment is made automatically. It is worth considering this payment option because if you miss the deadline, late payment penalties may apply, and the missed repayment may be recorded against you in your credit history both with the loan provider, and with the credit reference agencies Experian and Equifax.

Q. Are there any hidden charges on personal loans?

A. You should be made fully aware of all charges, including interest, insurance premiums and arrangement fees before you sign your loan agreement. Less obvious may be charges you want to consider that are payable should you wish to repay the loan early - these are listed on the product details page for each loan but you should also check with the lender when you are applying.

Q. Are there any hidden penalties for repaying the loan early?

A. Many firms levy an early repayment charge, which could be two or three months interest. However this may very between loan providers. Our selection criteria allow you to differentiate between loans with this feature.

Q. What is Payment Protection Insurance (PPI)?

A. Payment protection insurance or PPI is often sold alongside loans, and could help cover your loans payments if you were no longer able to work because of involuntary unemployment, accident or illness. The payment period is usually limited - typically for 12 months. You don’t have to take out this kind of insurance with a personal loan, but if you decide it is the safest route, don’t just take the PPI offered with your loan – these can be expensive and it could pay off to look for better rates and/or a wider level of cover.

Q. Am I obligated to accept the offer if I apply?

A. If you apply and are approved for a loan, you are under no obligation to accept the offer. An offer will be sent to your listed address; you can choose to accept by returning the signed document or reject the offer.

Q. What can I do if I’m rejected and I don’t agree?

A. If you are rejected for the loan you apply for, the loan provider details, for the loan applied for, will be emailed to you. This will allow you to contact the loan provider regarding any questions you may have about the refusal for a loan. You can also get a copy of your credit history at the following addresses:
Experian, PO Box 8000, Nottingham NG1 5GX, tel 0115 976 8747.
Equifax, Dept 1E, PO Box 3001, Glasgow G81 2DT, tel 0990 783783. See also - How do I check my credit rating?

Q. What happens once my loan has been agreed?

A. If a personal loan is agreed you will be given a written agreement to sign. Ensure you understand the terms upon which the loan is offered before you sign. This includes any loan set up fees due, penalties you’ll incur if you repay the loan early and the total amount you pay. The agreement may also include a ’cooling off’ period where once you have signed the loan agreement you have a short time to cancel it without penalty.

Q. When do I get the funds?

A. This will depend on the loan provider of the loan applied for. Most loan funds are received within 24 hours of approval and signing of the agreement. This may vary slightly between loan providers.

Q. What supporting documentation do you need from me?

A. This may vary between loan providers. Usually the loan provider will request your bank details and utility bills to confirm your address.

Q. Is a personal loan for me?

A. To decide this there are a number of factors to consider. These include whether it is necessary to borrow the money at all, or could you fund it from your existing investments? If you need the money for only a short time, would it be better to use a credit card or current account overdraft? Can you afford it - not just now but have you any other commitments on the horizon that would affect your finances?

Q. How can I find out how much I have left to pay?

A. To find out about an outstanding balance on a loan you will need to contact the loan provider directly. All loan providers must provide a statement at least once a year.

Q. Are there any geographical restrictions when applying for a loan?

A. Most lenders only accept applicants with a residential address in the United Kingdom.

Q. Who are your loan providers?

A. Our loan providers include lending institutions within the United Kingdom.

Q. If I have a problem with my personal loan whom should I contact?

A. In all cases you should contact your personal loan provider.

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Q. What exactly is a personal loan?