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What Is A Personal Loan?

A personal loan is when you borrow an amount of money from a bank, building society or other creditor, agreeing to pay it back over a set repayment term. You will be expected to make equal monthly repayments.

 

Loans can be interest free, but the majority will charge you interest. The rate of interest can depend on a few factors for example, the length of the payment term, the amount borrowed and your credit rating.

What Types of Debt is a Personal Loan?

Personal loans are ‘Unsecured’ i.e. not secured against your assets, so your home is not necessarily at risk if you fall behind on your payments.

You could have 81% of your debt written off.

How Do Personal Loans Work?

When applying to a creditor for a personal loan, you will need to provide enough details in order for the lender to carry out a credit search.

 

Depending on your credit score, a lender will offer you terms for a loan, informing you of the interest rate, monthly repayments and how much you will need to pay back in total to clear the debt.

 

It is worth noting that the interest rate you are offered can often be higher than the rates advertised by the lender, since they will advertise the best possible rate available.

 

When taking out a personal loan, you will be offered a range of payment terms, usually ranging from 12 to 48 months. The longer the payment terms the lower your monthly payments, but you will usually pay more interest in the long run.

 

If you accept the terms of the loan, then you will be requested to sign a credit agreement and nominate a bank account. This tells the creditor where to deposit the funds of the loan and from which account to take the repayments.

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What Happens If I Can’t Afford My Repayments?

In the first instance, if you are struggling to afford your repayments, or if you have already fallen behind, you should contact your lender and see what help they may be able to offer.

Your creditor may be able to offer you a payment holiday if this is appropriate to your circumstances. Otherwise, you may be able to agree a way of catching up with any arrears you may have.

If you fall behind with your loan, your creditor will begin taking steps to get you to pay it back. These may include:

 

  • Sending reminder letters or telephone calls

  • Adding additional interest or fees to your account

  • Applying for a County Court Judgement

  • Passing your debt to a debt collection agency

As with most debt, taking action to avoid letting the situation get worse is always a good idea.

How To Deal With Personal Loan Debt?

If you are having trouble making your loan repayments or if you have other unsecured debts that are beginning to get out of control, then the following solutions may be right for you:

 

If you live in England, Wales Or Northern Ireland:

 

If you live in Scotland then the following may suit your needs:

 

Contact IVA4Me for help. We can help you begin to get your life back on track.

Take The First Step Towards A Debt Free Life Today!

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Personal Loan Debt FAQs

Personal Loan FAQs

What Happens If I Can’t Pay My Personal Loan?

If you are finding it difficult to make the repayments for your personal loan, there are a number of steps that you could take. In the first instance, it’s best to create a budget for your finances, if you don’t already have one. This can be a great way of figuring out what you can

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