The Best Personal Loans - Best-Loans.org

During an individual’s lifetime, there may come a time when they need to borrow some money. This could be for consolidating debts, house improvements, wedding expenses or even for investing in an exotic holiday. The amount of money borrowed would really depend on what the loan is for, the monthly expenses of the individual and their employment status.

A Personal loan could also be a Joint loan (an individual and their partner/spouse could apply for the loan together). This has an advantage of combining the two monthly incomes which is a good point when applying to loan a large amount of money. A disadvantage is, however that both partners are liable for repaying the loan, so if one cannot keep up the repayments the other partner would have to pay instead.

The point of a personal loan is structured borrowing; you will usually pay a fixed amount over a fixed period. So the ideal situation in which a loan is appropriate is where you can clearly say to yourself that the life of the loan is the same or less than the life of the product. For example, a car can be bought with a personal loan. If the loan is for 5 years, it is fair to assume the car will last you five years, and possibly give you some money back at the end. (It normally works out cheaper to use a personal loan to purchase a car rather than Hire purchase as the interest rate is a lot lower). It is not really advisable to obtain a loan for the purpose of a holiday.

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Before applying for a Personal loan there are a number of factors one should consider.

Firstly, there are two different types of Personal Loan, a Secured loan and an unsecured loan.

A secured loan, which is also known as a second charge loan or homeowner loan, is used solely for homeowners. This is due to the understanding that their home is used as collateral for the loan.

An unsecured loan is a loan that can be used by both people who own their own property and those that do not (For example a tenant). This type of loan has less risk to the borrower compared to the secured loan as their property is not used as security against the loan.

You should decide what you want the loan for and how much you want to borrow. Then consider which of these loans would be best suited to you. If you require a substantial size loan and you own your own property, then it may be worth considering the secured loan. Any smaller loans would be more suited to an unsecured loan.

Other factors to consider when deciding how much to borrow and who to borrow it from, would include APR, Early Redemption Penalty fees and Personal loans payment protection.

APR (annual percentage rate)

Different organisations charge different APR rates so it would be highly advisable to compare a number of companies before applying for a loan. These rates would normally vary with the loan amounts. For example the more money you borrow, the lower the interest rate. However if you choose to pay the loan over a longer period, say 5 years instead of 3 years, you are able to pay a smaller amount of the loan each month enabling your finances to be better monthly but this would also increase the amount of interest to be paid, meaning you will pay more money to the lender at the end of the loan that you would if you paid it over 3 years.

Early Redemption Penalty

Some companies charge an early redemption fee if you decide to pay the loan amount back before the loan completion date. This could be around two month’s interest.

Personal Loans payment protection

When you apply for a personal loan, the company will ask you if you require payment protection. This is in case you are made redundant or become unemployed. The payment protection will pay the loan amounts each month until you are employed again. However, this does not include if you are sacked. It could also take a couple of months after you are unemployed before the payments start to be paid. The amount of this payment protection is normally quite high, making your monthly payments higher than normal which could potentially mean paying the loan over a longer term and being worse off.