There are many different reasons for borrowing money, as well as a number of different categories of loan products to choose from in the case of personal loans. These may range from traditional payday loans to the likes of longer term products such as instalment type loans. A common denominator however between all of these loans is that they fall into the category of personal loans and they can be provided to the customer by a direct lender or via a broker. This refers to loans, also known as ‘unsecured loans,’ which differ in nature and often size to the likes of loans such as bridging or logbook loans.
How Does a Personal Loan Work?
Personal loans do not need to be secured by any collateral. This means that whatever amount you borrow, the responsibility will be upon you, the borrower and not on a guarantor or personal assets you have, should you default on repayments or struggle to make your required payments on time. With a personal loan, it will usually work by a borrower being able to borrow a specific amount of money for a predetermined and agreed amount of time. Since interest rates are not likely to change in these cases, you can pay back the loan in equal instalments. This is why personal loans may sometimes be called ‘instalment loans.’
Typical Uses for Personal Loans
Personal loans can be used to help you in a number of different situations in the short term. It is important to note that these loans, all of which are designed for the short and sometime medium term, are not designed for long term use and are by no means a solution to longer term or underlying financial or debt issues. Typical uses of these loans however, often include the following:
To cover emergencies – Sometimes unexpected bills arise; perhaps as a result of a medical emergency or car troubles for example and as a result, you need to find money to cover these costs quickly and efficiently. A personal loan can be very helpful with covering these expenses, enabling you to receive the money promptly; having the option to repay the loan over an extended period of time.
Wedding costs – The cost of a wedding can be extremely steep. Often young couples do not have sufficient savings prepared for the day leading to pre-wedding stress and tears. A personal loan may be able to help you cover the cost of the big day, allowing you to pay for the necessities over several months, whilst you settle into a new rhythm.
Home maintenance, repairs and improvements – There are many things that need to be maintained to ensure that a house is in working order, for example pipes in bathrooms, kitchen appliances and electrical circuits all require upkeep, and a personal loan can help to ensure you can keep everything in your house functioning properly. Boiler breakdowns, particularly in the winter require an increased degree of urgency and should you not have the funds immediately available to pay for such repair, a short term personal loan may be ideal to tide you over.
Funeral costs – Funerals can end up placing a huge financial strain on a family. A personal loan can help alleviate some of the stress during an already difficult time by helping to cover the cost of the funeral or cremation, allowing you to pay the loan back later or spread out over a more manageable time period.
What is APR?
The APR (%) is a number advertised by lenders, enabling borrowers to easily compare similar financial products. Its primary purpose is to give you a quick way to compare similar products.
The APR is calculated using a number of factors, including, the amount you borrow, the duration of the loan, how frequently you make payments in instalments and how much they are for, as well as any extra charges that may be added into the total loan repayment.
Instalment Loan Charges and APR
In addition to publishing our APR, we endeavour to clearly communicate how much borrowing a loan from MoneyBoat will cost. We do this by providing a detailed breakdown of your repayment schedule. This includes the dates of repayment, principal and interest repayment amounts, the duration of time interest has occurred for each repayment and the total. In addition to the APR, we display a breakdown of repayments on both the pre-contract information sheet that we provide as well as the loan agreement and our funding confirmation email. The following equation is used to calculate the APR for each loan were the left-hand side represents drawdowns and the right represents repayments.
Use our sliders above to work out your repayment on your next instalment loan. Remember, the above example is over 113 days; the interest charge for credit is 0.7% per day so will change depending on the number of days the loan is taken out for.
Should you require more information or a further explanation please contact us via phone or email.