There comes a time in many people’s lives when personal borrowing is necessary. This has been especially true due to COVID-19. An estimated 506,000 people lost their jobs between the start of 2020 and October 2021, which will no doubt have been heavily influenced by the ongoing pandemic.
This may have caused many people to consider a personal loan to support their finances. The most recent data available revealed that around 60% of UK adults had taken out a personal loan.
Getting a loan may seem like a long and arduous process, but it’s fairly straightforward. You just need to understand where to start and what the terminology means. Follow our guide and you’ll find it easy to secure your next personal loan should you require it.
Why might you need a personal loan?
Before getting into the how, you may want to know why people take out these loans in the first place. Here are some of the main reasons:
- Emergency expenses – This could be car repairs or last-minute bill payments.
- To buy a car – Taking out a loan to buy a car is usually cheaper than financing one. You’ll own the vehicle outright too.
- Home improvements – Often these cost a lot, so you’ll need to save for a long time or take out a loan to finance it.
Types of borrowing
There are many ways to borrow money, but the most suitable one for you will depend on factors like the interest rate, your credit score and the repayment timescale. Here are some examples:
- Personal loans – Borrow a fixed amount and repay in monthly instalments over an agreed period.
- Payday loans – Receive a small amount at a high interest rate and repay it in full on your next payday.
- Bad credit loans – Obtainable for people with the lowest credit scores but expect high interest rates.
Examples of Lenders
You can also get loans from various sources. Each will have its own requirements, so find one that fits your situation.
- Direct lenders – An easy way to get your loan, direct lenders deposit the money straight into your account once you’re approved. You’ll deal with the lender directly, so you might not have to contend with extra admin fees compared with going with a broker. They usually offer a variety of loan options – including long-term, short-term and bad credit loans.
- Banks – Banks also offer a variety of options, including secured and unsecured loans.
- Friends and family – If you don’t want to go through an application process or credit checks, ask a friend or family member for financial help.
Wherever you decide to take a loan from, ensure you can afford to pay it back. Taking out credit can help you to get your finances under control, but if used for the wrong reasons, it can do more harm than good.
