Find your way in the jungle of personal loans
- Personal loans can be a quick solution to an unexpected situation
- Remember to pay back your loan in time
- Finding the right lender is easy with Moneezy.
Don’t know what exactly a personal loan is? Or are you unsure where to start looking? Are you unhappy with the previous loan you took, and you need to find a new lender? Don’t worry, we’ve got you covered. In this article we’ll discuss what a personal loan is, what types of personal loans there are and how to get the right one for you. We’ll be explaining the pros and cons of different personal loans, what you need to consider before getting one.
What is a Personal Loan?
Personal loans are general-purpose loans. Typical reasons for getting a personal loan can be location changes, house renovations, weddings etc.
There are two types of personal loans – secured and not secured ones. Secured personal loans are bigger loans that require a collateral. Collateral is an asset or a piece of property that secures the loan in case you cannot repay it. The advantages of a secured loan are that you can get a bigger loan amount and lower interest rates.
Unsecured personal loans are loans for those small amounts you fall short by at the end of the month, or for any emergency that might befall you. They are easier to obtain even if your credit history isn’t perfect. Actually, an unsecured loan can help you improve your credit profile if you repay it in time. The downside on unsecured private loans is that interest rates are higher, due to the lack of collateral. Lack of collateral means the financial institution giving you the credit has no guarantee they will get their money back.
What is an unsecured Personal Loan?
The concept around unsecured personal loans is quite simple. You take a loan and use the money for whatever you needed it in first place. When your next paycheck comes in, you pay the loan back with interest. An unsecured personal loan requires no security, deposits or guaranty of any sort. In some cases, there is also no need for a good Credit Score.
What are the advantages?
The greatest advantages that unsecured personal loan have over other types of loans include the following:
- Super-fast and easy to obtain
- No security deposit or guarantor required
- Fast approval and payout
- No lengthy processes and delays
- Easy online application
The advantages of online personal loans over bank loans:
- Even faster transaction, a loan can be approved in as much as 15 minutes
- You don’t need to take a day off your work and go anywhere
- The payment options are simpler and more convenient
What are its disadvantages?
The main disadvantages of online personal loans are:
- Higher interest rates, due to the lack of collateral
- Higher fees
We can easily see that the Pros easily outnumber the Cons of unsecured personal loans, provided that one is cautious and pays back in due time. It is a good choice for someone with not enough savings when an unexpected situation occurs.
Is this the right loan for you?
A personal loan is one of the easiest loans to get. It requires absolutely no security, no guarantor, no lien or anything like that. All you need is a bank account and a proof of income, for example, a pay stub. The online loan services are so easy and fast; you can apply for a loan even in your lunch break!
However, we still recommend that you take your time and really think about taking a loan and make sure to compare your options. Use the time and find a loan that will match the amount you need, the time you will need to repay it and remember to compare the different lenders available. On moneezy.com you can easily compare loan offers from different money-lending providers.
How much does a personal loan cost?
The interest rates for unsecured personal loans in UK are capped by Financial Conduct Authority (FCA). The maximum cost of the loan can be two times the original amount of loan.
The actual costs of personal loans can vary depending on the amount of loan and the lender. The default cost can be at maximum £15 and the interest rate cannot exceed 0.8% per day.
For example, consider that Person A gets a loan for £200 with an agreed total cost of £37.4, two weeks before their payday, so the agreed loan period is two weeks. But they fail to pay back in time due to a busy schedule or a typical lack of seriousness or due to an unprecedented financial situation. The lender charges an additional £22.4 to roll it over by another couple weeks, hence Person A ends up having to pay £59.8. If they keep rolling it over, they might end up having to pay more, up to £200 in worst case scenario. So only take personal loans in the amounts that you know you can pay back in time.
Also consider another example, say Person B takes the same loan for the same amount and same period. As the paycheck arrives, Person B pays it in full and gets rid of the loan. In this scenario, there the person only had to pay a total of £237.4. And the loan ended up helping them in the hour of trial. It can even benefit by improving their Credit Score in such a scenario if the lender reports that in time payment to the officials.
The payments for online personal loans can be made in multiple methods. You can use an advance check or the payment can be made via bank transactions, or directly by your debit card as well. The particular method may depend on the lender and most online lenders do offer multiple methods as well.
What is the next step?
Before applying for an online personal loan, all you need to do is calculate how much money you need. Then head to our comparison page and find the right offer for you. Simply click on the provider you would like to get a loan from, and we will redirect you to their website.