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If you need to borrow money, whether to pay for important home improvements, a new car or even to consolidate existing debt, a personal loan could be an option worth exploring.
Personal loans typically let you borrow more than you’d be able to with a credit card, and you repay this amount over a set term in fixed monthly repayments. However, they won’t be the right choice for everyone, so we take a closer look at both the advantages and disadvantages of using a personal loan to see whether they could work for you.
A personal loan enables you to borrow a lump sum of money to be repaid over a set term – typically between 1 and 7 years. You can usually borrow any amount from £1,000 up to £15,000, although some lenders will stretch this to £25,000. The most competitive interest rates tend to be on sums of £7,500 upwards, but you’ll usually need a good credit score to secure the very best deals.
The amount you borrow is then repaid in fixed monthly repayments, making it easier for budgeting purposes. However, this also means you’ll need to ensure you can afford your repayments each month.
Personal loans are also known as unsecured loans, which means they do not need to be secured against an asset such as your home – as a secured loan would be. This means they are lower risk as there is no danger of you losing your home if you are unable to keep up with your repayments.
There are a number of benefits to using a personal loan:
Of course, there are downsides to be aware of too, so you’ll need to weigh these against the benefits:
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