Personal Loans

Where from? Banks, building societies, finance houses.

How they work You borrow a set amount for a specified period anything from, say, one year up to five or seven years - and you are charged a rate of interest which is fixed at the time you take out the loan. You make regular repayments throughout the term of the loan. There's usually an upper limit on the amount you can borrow - for example, £10,000 or £14,500 with a bank, but more with finance houses and building societies. The latter may be unwilling to lend unless you are an existing customer. There will usually be charges if you want to repay the loan early.

Points to note These loans can be secured or unsecured. Secured loans will be cheaper than unsecured loans from the same source, but you may find a cheaper unsecured loan from another lender - finance house loans in particular can be relatively expensive. Some lenders - but not all - charge a higher rate of interest on smaller loans (less than £4,000, say) than on larger loans.

Verdict Unsecured bank and building society loans are worth considering if you can't get a bank ordinary loan. They are useful for all kinds of purchases - cars, electrical goods, holidays, and so on. But be wary of taking out a personal loan when interest rates generally seem high - you'll be stuck with the fixed interest rate even if other rates fall. Avoid secured loans unless you are sure you can keep up the repayments.

WARNING

Banks may want loan repayments made direct from your current account with them. Watch out for phrases such as 'if you don't already have a current account with us, we'll be pleased to open one for you' which means 'if you want a loan from us, you must have an account with us'.

TIP - Each summer, when many people are preparing to buy a new car with the latest registration letter on the number plate, many banks offer specially good deals on car loans. But check the terms carefully - a special deal from one source may still not be as good as a loan from another source.


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Bank Ordinary Loans

Where from? Banks.

How they work You arrange to borrow a set amount which is then paid into your current account. You then use the money as and when you like. You repay regular amounts into a separate loan account. Interest is variable.

You negotiate the loan individually with your bank manager, so terms may differ from customer to customer. You may be able to borrow more than with other types of loan and for as long as ten years.

Points to note These are very much the Cinderellas among bank loans - they tend not to be advertised and you might be encouraged to take out... see: Bank Ordinary Loans


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