Personal loans in England are available for almost any “personal” reason (i.e. not for business purposes), such as purchasing a new or second hand car, family holiday, home improvement or even debt consolidation. There are many brokers, banks and lenders available servicing the whole of England, so there is a lot of choice and many factors to consider when applying for a loan.

Secured loans (sometimes referred to as homeowner or home loans) are basically loans secured against some form of collateral. Nowadays that collateral will be a property owned by you in 99% of cases, although loans secured on other assets like pensions or investments are possible. Basically, as the loan is secured on an asset, this means that should you default on the loan repayments the lender can use the equity in your home to recover the debt. For this reason the perceived risk to the lender is small and therefore they can lend larger amounts to customers with lower credit scores at reasonable rates.

In England, unsecured personal loans are not secured against any form of collateral or assets. The lender bases the decision on lending entirely on the applicants credit score. The reasoning behind this is that if you have existing or previous lines of credit which you have repaid in full, or are maintaining payments in a timely manner, then the likelihood is you will continue to conduct your finances in this manner and are a low risk in terms of lending. Conversely, if you have been late with payments in the past or are currently behind with credit payments, then you are seen as a high risk.

Before applying for a loan you need to ask yourself the following questions. Firstly, how much money do you actually need to borrow. Never borrow more than is required simply because it is offered to you, remember it all needs to be paid back! How long do you need to repay the money? This can be determined by how much you can afford to pay each month. Carefully examine your incomings and outgoings, taking into account unforeseen problems and leaving yourself a safety margin, and decide exactly how much you can afford to repay every single month.