If you are looking to withdraw a loan for your own personal needs, this will be some form of personal loan. A personal loan is when an individual borrows cash on account of their own personal necessity. This is in contrast to, for example, a business loan which can only be used for purposes related to your business.
Personal loans, particularly those online, enable people that need to borrow money, typically online, to apply for the loan amount they need on an unsecured basis. These loans allow borrowers to utilise the money for various purposes including paying off other debts, car repairs, making emergency payments and more. One of the key benefits is that they come with short to moderate term repayment plans and relatively quick funding. But, which is the right loan for you?
How to Find the Best Personal Loan
Before looking into potential loans you can withdraw, it is important to do your own research on what you’re looking for in a loan. Some things to consider include:
- Credit Score – A credit score is a key indicator of your eligibility for a loan. Before you take steps to take out any form of loan, you should check your score, using an online checker like Equifax or Experian. The higher your score, the better your chances of being accepted by a lender and with better rates.
- Loan Amount – You must know the loan amount you wish to borrow before applying to any lenders – the last thing you want to do is borrow too much or little as this will affect your ability when it comes to paying it back.
- Repayment Term – It is generally preferable to take out a loan with a shorter repayment term. This will prevent repayments from dragging on too long. However, a short span to pay back your loan will naturally increase things like the interest rate owing to the lesser number of installments, so don’t be too hasty to pick the shortest repayment term you can find without checking its requirements.
- Interest Rates – You may assume that a lower interest rate is always better, but be careful! When you opt for low interest rate loans, you may end up paying more due to other unreasonable factors – for example, an extremely long repayment period.
- Additional Charges – Other charges may include foreclosure and prepayment charges that you must pay to your lender before your loan tenure. In addition to this, you may also need to pay other charges such as administrative fees, loan processing fees, and so on. Always make sure you check with the lender regarding any additional fees to avoid any nasty surprises.
Keeping all of these financial goals in mind, and making sure you always check the credibility of lenders and the quality of their customer service, you can go about proceeding to apply for the right personal loan for you.
What Different Types of Loans Are Available?
Once you have a list of requirements that you’re looking for in a loan, you can begin to search around for the right loan for you. In doing this, it is important to contemplate a selection of personal loans before settling on the best one for you. These may include:
1. Personal Unsecured Loan
These allow you to borrow a relatively small amount, typically around £1,000 though it may be higher. This loan is lent on the basis of a borrower’s creditworthiness, rather than by any type of collateral, so whilst you won’t need to provide any asset, you may need a high credit score.
2. Payday Loan
These are short-term loans typically lent on a very high interest basis. They are easily accessible, but their high interest makes them risky, so make sure you have a solid repayment plan and shop around at different lenders before settling.
3. Secured Loan
Secured loans, as opposed to unsecured loans, require an asset as collateral. This loan may be suitable for you if you are confident you can stick to the payment schedule to keep your assets. These loans also tend to have lower interest rates due to the collateral you provide. When it comes to secured options, for some, it may not be possible to get a secured loan and in such cases, particularly if in debt or if looking to sell a probate property, homeowners may need to sell their property quickly as a last resort.
4. Guarantor Loan
To qualify for these loans, you need a guarantor who will repay the loan on your behalf if you’re unable to. Close friends or family members usually take on this role. Having a guarantor can increase your chances of being approved for a loan, especially if you have a poor credit score.
5. Debt Consolidation Loan
This lets you bring together all of your existing loans into one manageable debt. Not only could this save you on the total money you pay each month, but also make repayment a lot simpler and less time consuming.