Personal loans

Monday, 13 November 2006 12:18

A personal loan is a loan for personal use that is based on a consumer's income, existing debt, and credit history.

Personal loans are typically not secured against property, although they can be secured against other possessions.

To try and prevent borrowers defaulting on loan payments lenders use credit scores - a history built up over time of how good consumers are at paying off debt - to decide whether or not to lend money, how much money to lend, and how much interest to charge on the loan.

Personal loans typically come with a set period for repayment of between six months and ten years.

Rates vary heavily between providers so consumers are advised to shop around.

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