Personal loans, are loans taken out to cover personal or household purchases rather than purchases for a business. For example, if your fridge freezer or washing machine breaks down unexpectedly and you don’t have money saved to buy a replacement, you may decide to apply for a personal loan.
Many personal loans are unsecured which means they are not tied to an asset. Repayments are usually made as fixed instalments over a pre-agreed time.
When you take out a personal loan, you are required to pay interest on the loan and there may also be additional fees. Some loans have fixed interest rates which stay the same for the term of your loan, whilst others have variable rates, meaning the rate can change.
Although one loan may have a lower interest rate than another, the fees could be higher, which means you pay back more in total. When you are comparing loans, one factor to compare is the APR as this includes both the interest and the fees, but you should also compare other factors like repayment lengths. It is important that you understand what rate you are being offered and how much you will be required to pay back before you agree to any loans.
Personal loans can be used for a variety of things, but you should try to avoid taking a loan for unnecessary splurges. If your purchase is not urgent, save the money instead so you don’t have to pay interest or fees.
Advantages of a personal loan
Personal loans are usually quite straightforward. Once you have been accepted, you receive the money in a lump sum and then you make repayments in instalments over a fixed term.
Because the repayments are usually a fixed amount, you know exactly how much you will have to pay each week or month which makes it easier to budget.
Disadvantages of a personal loan
Interest rates on personal loans can be higher than on other types of credit, especially if you have a poor credit rating. Some companies have a minimum loan amount which means you could end up borrowing more than you need.
Applying for a personal loan
- Only apply for a loan for purchases you really need
- Do your research to find the most suitable loan for you
- Look for fixed-rate loans if you don't want the interest rate to change as you pay off the loan
- Check the interest rates, fees and APR before you apply
- Check if there are any late payment fees
- Make sure you understand the terms of the loan and any fees before you sign an agreement
- Don't be afraid to ask questions if you do not understand the terms
- Onyl apply for loans from a reputable company
- Make sure you can afford to repay the loan
- Don't borrow more than you need
Morses Club Home Collected Loans
Morses Club is one of the UK’s leading providers of home collection loans. Our agents will visit you in person at your home to discuss your loan application and explain the terms. If your application is accepted, the agent will visit you each week to collect repayments.
For more information on our loans, visit our how it works page.
Author: Morses Club