Why take out a personal loan?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
21st June 2021
2 minute read
There are lots of reasons why you may be considering a personal loan. You might be looking to make some improvements on your home or to buy a new car. Lenders will usually need to know the reason for your loan.
Reasons for a personal loan
The most popular reasons for taking out a personal loan can be found in our guides. Remember that the specifics of a personal loan will differ from one individual to the next, depending on credit history and the loan amount required. These factors in turn can affect interest rates and payback time.
Your own personal circumstances will also influence the type of loan you can acquire. Types of loan can include factors such as whether a loan is unsecured or secured against your assets, or whether you pay back the loan in fixed or variable rates of interest. See our guide to which personal loan is best for me for more information, or find alternatives to a personal loan here.
To find out the reasons why you might want to take out a personal loan, see our list below.
Loans for Home Improvement
A home improvement loan is a type of personal loan taken out to make changes to your property. You might want to add some extras or extend your home so that you increase the likelihood of a higher sale price in the future. Loans for home improvement can be unsecured or secured, using your home as collateral. Secured loans can usually be taken for higher amounts.
Bridge Loans for homes
A bridge loan for homes is a type of short-term finance, designed to allow you to temporarily bridge a gap for purchasing a property. You can take out a bridge loan for just one day, or arrange one for up to a year. They’re most commonly used for just a few months, and are secured loans using your home or homes as collateral.
Loans for Weddings
A wedding loan is an unsecured personal loan with a fixed rate of interest, taken out with the specific intention of funding your wedding day. A typical wedding loan may be between £10k and £15k, paid back over five years.
Loans for Debt Consolidation
Debt consolidation loans are a way of combining any money you owe to different creditors – like personal loans, credit cards and store cards – into just one loan. In turn, this means you can swap many monthly payments for just one, to a single loan provider. Debt consolidation loans can be unsecured or secured against your assets, depending on your circumstances.
Loans for Holidays
Specifically for funding a holiday, these loans are usually unsecured with fixed monthly payments, so you know what you’ll need to budget when it comes to paying the money back – along with the agreed interest.
Loans for Bad Credit
The term 'bad credit loan' is sometimes used to describe a loan taken by a person with a less than perfect credit history. It can be any type of loan, secured or unsecured, the difference is that these types of loans cater to people with either lack of credit history or impaired credit files, and generally will come at a higher cost, compared to loans aimed at people with excellent credit files.
A car loan – a loan for buying a car – is usually an unsecured personal loan with a fixed interest rate. This means that your interest rate is agreed at the start of the loan and doesn’t alter during the time you’re paying the money back.