What can I borrow money for?
In most cases a personal loan can be used for whatever you wish – as long as it’s legal! It could be that you need some extra money for home improvements, for a big ticket item such as a fridge or holiday, or even to fund a wedding. Money can also be borrowed to purchase a house using a mortgage, a car via hire purchase, as a business investment via a business loan or as a way of consolidating existing debts via a number of different loan types. The main thing to remember when borrowing money is to first ask yourself if you really need it, and secondly to make sure that you borrow only what you can afford to repay.
There are 2 main types of loan; unsecured/personal loans and secured loans.. An unsecured, or personal, loan is usually a fixed term loan with a fixed interest rate. It is typically taken out for amounts between £1000 and £25000 and is granted based on the credit rating of the applicant. A secured loan is borrowing that is secured against your property. This property can then be repossessed should the repayments not be made. Because the risk to the lender is less, the borrower can often benefit from longer repayment terms and reduced interest rates.
One of the main reasons people may want to take out a loan is to consolidate debt. A debt consolidation loan whether it is a secured loan or unsecured/personal loan is taken out to pay off multiple existing debts. The intention is to consolidate these debts into one monthly repayment that can be easily managed. An additional benefit would usually involve reducing monthly outgoings, although more may be paid overall.