Glossary - Personal Loan

Personal Loans are loans taken out by an individual.
A personal loan is a term that describes a secured loan, an unsecured loan and a tenant loan. It is a loan that is taken out by one person hence the name and a personal loan can tailored to fit an individual’s financial requirements or circumstances.

Example: UK Personal Secured Loan
Property is used for security on a secured loan, meaning low rates and flexible repayment terms for the customer. With property being used as security there is less risk to the lender when arranging these type of loans.
If the loan is not repaid the property that it is secured on will be at risk.
The charges on a secured loan, the term of repayments and the interest rate charged vary according to an individual’s circumstances and the policies and financial products of the lenders.

Example: UK Personal Unsecured Loan
Property is not used as security on an unsecured loan. The lenderis taking a greater risk so for this they will charge a higher rate of interest. The APR terms and conditions will be alot more strict to mirror the lenders higher risk.
Remember that more interest will be incurred if an unsecured loan is repaid over a long term.
If an unsecured loan is not repaid the lenders will try to recover their losses. If the borrower owns the property their debts could be settled by the borrower selling the property and paying back the debts they owe.

Example: UK Personal Tenant Loan
If a tenant is living in a council or housing association property they will have no security to offer a lender. Iinterest rates, terms and conditions plus the APR are higher than on secured or unsecured loans as tenants are classed as high risk and do not a property to help them repay debts. However customers should still Enquire for a personal loan as they can help to improve their own credit rating by making regular full payments on the loan. The better their credit rating the easier it will be for them to obtain future finance., they may be able to get a mortgage in the future.

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