COMMERCIAL FEATURE: Going down the personal loan route can be a great move for people who want to purchase something that doesn’t fit into their personal budget or consolidate their debts into one easy-to-manage monthly payment.

However, lots of people apply for an advertised product without doing their homework properly. This can be unwise, as making additional and unnecessary loan applications can harm your credit rating. You can also end up with a product which is a poor fit to your particular circumstances or is more expensive than you first thought.

It’s far better to take the time to read up on the different options available so you apply for the right product first time. Here’s a guide to some of the key information you might want to check before making an application:

Have you checked your credit rating?

Before making any application for a loan or payment plan it’s wise to check your credit rating. Lenders want to make sure that you’re a good risk and don’t have a history of bad debts and unpaid loans behind you. To do this, they’ll check your profile on credit registers.

Credit reference agencies Experian and Equifax offer detailed breakdowns of your credit rating. Make sure that all the information on your report is accurate and up to date – it’s easy to make a complaint if you notice a mistake. Errors do happen, so it’s important to correct them when you notice them. If there have been any problems with your repayments in the past, make sure your report includes an explanation of why these happened. Rectify any bad debts or overdue charges immediately.

Do your research

Once your credit score is fully up to date you should research the loans available on the market to decide which is suitable for your particular circumstances. Make sure you have a good understanding of the kind of product you’re applying for. 

It’s important to remember that a personal loan is exactly that – a loan for you to spend as you wish. Whether you decide to purchase a car, carry out home improvements or consolidate your debts, a personal loan will allow you to spread repayments over a longer time at a lower interest rate.

Terms and conditions

Some lenders will give you a loan for a short six month period, although a year is more common. The maximum length is usually seven years, although some companies will lend over ten.

You can generally borrow anything up to £15,000, but some lenders offer up to £25,000. Before you decide on a loan, you should make sure that you are completely happy with the repayment plan and the amount that you’re going to borrow.

Secured and unsecured loans

A secured loan enables homeowners to borrow money from lenders by using their property as security. Because the loan is secured against your home, the interest rate is normally cheaper than an unsecured loan and you’re normally able to borrow more.

An unsecured loan, however, is not secured on your home. As long as you meet your payments, your debt will be paid off within a set time. Borrowing with an unsecured loan tends to be cheaper than using a credit card or overdraft facility. The unsecured loans market has become much more competitive in recent times, with interest rates falling.  

If you want to get more information on personal loans visit the Clydesdale website.