Personal Loans

What is a personal loan?

A personal loan is an exact amount of money repaid over a set amount of time. In essence, you would pay back a set amount every month, including interest, until the debt is settled.

Personal loans are also known as unsecured loans, a type of instalment loan, because you don’t need to secure it against something valuable that you own, such as a car or your home.

How do they work?

A lender will look at your application and then consider your income and any existing debt and outgoings. Based on this, a decision will be made about how much you can borrow and over how long.

Interest rates are usually fixed so you know exactly how much you will pay every month.

To consider

  • Personal/unsecured loans can have higher than usual interest rates, rather than loans secured against something. This may also apply to you if your credit rating is not good.
  • Credit scoring is heavily relied on by lenders due to the fact that it is only a ‘promise’ to pay it back; they wish to see that you are a good at repaying debt.
  • It is worth acquainting yourself with the various aspects involved in borrowing from different lenders. This will include APRs, loan lengths, T’s & C’s, and repayments.
  • Ensure you only borrow what you can comfortably afford to pay back every month or you may find yourself in financial difficulties and with a negative credit score.


  • These loans are easier to budget for as there is a set repayment.
  • Personal loans generally have a fixed rate (but it can vary, so double check first).
  • Although it may extend your loan’s terms, you can consolidate other debts into a personal loan. This means just one repayment to one lender.
  • Personal loans can have a lower APR than credit cards if there is a large outstanding balance.
  • You may be able to borrow more than a set credit card limit.

Payday loans

What is a payday loan?

A payday loan is s short term but high-cost loan that is designed to help people receive a quick cash injection before the next payday.  (Some lenders may allow you to extend the repayments). They may also be known as a ‘payday advance’ or ‘cash advance loans’ too.

How does it work?

If accepted by a lender, the amount agreed between is taken directly from your bank account on the date agreed, including any interest that you have been charged. They are useful when dealing with an emergency or unexpected bill, such as car repairs, a vets bill, etc.

To be considered (negative points/risks)

  • APR rates can be very high with this type of loan.
  • Some payday lenders can fall exempt from some state laws that limit interest rates. Some states have few restrictions and some states outlaw payday loans completely.
  • Ensure you can repay the amount you borrow on your next payday or you could end up in a spiral of borrowing and debt.


  • Used in a sensible way, these short-term loans can help your choices regarding spending that may otherwise not apply.
  • They can be used for borrowing a small amount over a short period of time rather than a bad credit loan which may tie you in for longer.
  • They are designed to give you quick access to the money you need.