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A personal loan is a lump sum which you borrow from a bank, building society or another lender. A personal loan could be the best option for you if you are looking to borrowing money for between 1 and 5 years and is particularly ideal if you have other debts that you're looking to consolidate into one loan to reduce your overall monthly payments.
There are two main types of personal loan - unsecured loans and secured loans. A secured loan has the value of your property set against the amount borrowed. Remember! Your home is at risk if you fail to make payments on your mortgage or other loan secured on it. Unsecured loans are not secured on your property.
If
you already have a mortgage you could be better off if you choose to add
to the value of that loan, rather than taking out a new personal loan.
By re-mortgaging you can add to the total sum of the mortgage and gain
access to additional finance without paying the higher interest rate of
a personal loan.
The
downside can be if you have redemption penalties on your mortgage, the
cost of re-mortgaging may be greater than the cost of taking out a
personal loan.
When you apply, the lender will perform a full credit check on you with credit reference agencies. If you are refused a personal loan it may be because you have had County Court Judgments registered against you in the past, previously declined applications for credit, defaults on payments, arrears on a mortgage, any repossession of property or cancellation of a credit card by the credit card company.
Payment
protection schemes can offer you peace of mind that in the event that
you are unable to meet your required loan payments due to accident,
illness or redundancy, you loan payment will be covered.
Cover
may vary and you should carefully check what the particular payment
protection policy or scheme covers (and any exclusions).