CREDIT CARD GUIDE |
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Unsecured personal
loan
A personal loan
available from a bank, building society or other financial institution without
security. They are usually covered by the terms of the Consumer Credit Act.
A lump sum will
be loaned in return for you agreeing to make regular repayments usually by direct
debit. Personal loans are available from £500 up to £25K (security
will usually be needed for loans of large amounts) and are repayable over a period
of time, usually between 6 months and 10 years.
Lenders charge
interest, which can either be fixed or variable, on the amount borrowed. This
interest charge is expressed as an APR (annual percentage rate). The APRs will
vary dependent upon the amount of the loan and sometimes the term as well. Usually
the rate is fixed on your loan repayments and will remain the same throughout
the period of the loan. It may be variable, particularly in the case of longer
term loans, and you must be advised of this possibility at the outset.
Payment Protection
Insurance
This is an insurance
that will cover your monthly loan repayments in the case of unemployment, accident,
sickness or death. There are sometimes different levels of insurance providing
different cover so it is important to check the small print to ensure the cover
provided is suitable for your needs.
Secured personal
loan
A secured personal loan is one in which some of your property (home, stocks and
shares, etc) is held, by the lender, as security for the amount you have borrowed.
Secured loans usually offer lower interest rates than unsecured ones.
An unsecured car loan
An unsecured car loan is a personal loan offered solely for vehicle purchases.
An unsecured deferred car purchase loan
An unsecured deferred car purchase loan offers the borrower an option of finance
for a vehicle. With an UDCPL a borrower sets up the loan with a financial institution,
not necessarily with the manufacturers' finance house. Essentially a percentage
of the loan is deferred until the end of the term at which point it has to be
repaid. Typically the term of the loan will be between one and four years. So,
for example, a loan over one year could be deferred by say 60 per cent. Once the
loan is repaid in full, the car is fully owned and can be used, for example, as
a deposit for another car loan
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