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Personal loans

Readily available, personal loans are a long-standing form of finance that has seen major changes in recent years. Since the advent of credit cards and in-store finance, personal loans have enabled many people to restructure existing debt. Instead of using a Personal Loan to purchase an expensive one-off item, more and more Banks and Building Societies try and use it to help their customers pay off large credit card bills.

The main advantage of a Personal Loan is that it offers a fixed rate of interest over a set period. This means that the customer will know in advance exactly what the monthly repayments will be until the end of the term. This allows people to budget in a structured fashion. Another advantage is that instead of using credit cards, consumers can have the funds paid directly into their current account and can, therefore, use cash to attempt to obtain a better deal. This increases the customer's buying power and is a big selling point for the more traditional financial institutions.

Unlike mortgages, they are generally regarded as unsecured lending. The financial institution will normally assess a client's suitability by a system of credit-scoring. Each aspect of a person's lifestyle will obtain them a certain score ? such as owning a property outright and having lived at the same address for more than five years. Once a customer reaches a certain score then the application is approved and the funds made available. Most companies offer some kind of payment protection insurance scheme, whereby if a customer is made redundant or falls ill a certain amount of repayments will be made on their behalf by the insurance company.

More Banks and Building Societies are becoming more sophisticated thanks to the increased level of data collection now undertaken by most financiers. Customers may find their bank already has a certain figure automatically approved if they ever wanted to take a lump sum out in this fashion. These pre-approved limits can come with variable interest rates dependent on how valuable the customer is.




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