All manner of people and organisations borrow money from time to time.
The reasons for borrowing are numerous as are the means by which money is borrowed.
It is likely that any individual who wishes to borrow money will do so by way of an overdraft,
a credit or charge card or a personal loan.
This section will focus on personal loans.
What is a Personal loan?
A personal loan is an amount of money offered, normally by lending institutions
such as banks and building societies, on the condition that it will be paid back at
some later date. Personal loans are available in a whole host of formats and can range
from £500 upwards. The term of the loan is often dependent on whether the lender requires
security to be offered by the borrower and the size of the regular repayments you wish to make.
Under most personal loan arrangements you receive a lump sum, equal to the amount of the agreed
loan and in return you agree to make regular repayments. These repayments are normally monthly
and cover both the interest due and the capital outstanding loan amount. If you elect to have
repayment protection (which we look at later) then it may be added to the monthly repayment.
If you have established the loan as a 'repayment' type loan then the repayments will include
an amount to pay off some of the capital and reduce your outstanding debt.
Payments are made throughout the term of the loan to ensure that the total debt is repaid to the
lending institution.
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