So here are answers to some of the questions we get asked most, as well as a glossary of terms to help cut through banking jargon.
There are four 'main' types of loan: debt consolidation, home improvement, car and special occasion (which usually refers to weddings and holidays).
Before choosing a loan consider the following:
If you have had problems in the past with credit or currently are experiencing financial difficulty then you may think you'll struggle to find a loan but there are loans for bad credit available.
You must have a credit history to get credit - sounds strange to those who have never borrowed before, how are you supposed to get started? You can build your credit score in a number of ways, not just through big financial products but getting a mobile phone contract or paying car insurance will also build your credit history.
Getting into debt can be a stressful experience but keeping calm under financial strain will help you to effectively manage your debts:
You want to agree to the most desirable terms possible so always read the small print, as these can include some of the following:
The percentage of customers who are successful in their loan application.
Adverse credit rating
A bad credit rating.
Stands for Annual Percentage Rate. Encompasses the interest rate and other charges you'll have to pay such as arrangement and annual fees which lenders are obliged to include in the interest rate they advertise. This means you can use APR to compare the true costs of different loans.
The advertised APR that will be offered to at least 51% of customers who apply and are accepted for a personal loan.
Bank of England
The central bank of the UK, responsible for setting the base interest rates for the economy.
Factor used by lenders to assess your ability to manage and repay your debt. The higher your score, the more likely you are to be granted a loan.
A record of an individual's financial borrowing, including information about late repayments and bankruptcy.
Credit reference agencies
Hold and pass information onto lenders seeking details on an individual's credit history.
Where various existing debts are transferred into a single loan.
When a borrower fails to keep up with their loan repayments.
If you want to pay your loan off early this is called an 'early settlement'. Under the Consumer Credit Act lenders have the right to charge a one off payment for repaying the loan early.
Fixed interest rate
A set interest rate that cannot go up or down during the period of the loan.
Your income before any deductions are made.
The increase in the price of goods and services in the economy over a period of time.
The amount you are charged for borrowing money. This is a percentage of the total amount of the loan and varies based on individual circumstances.
A contract between the lender and borrower stipulating the terms and conditions of the loan.
The key requirements an individual must meet before they are eligible to apply for a loan, for example age or income level.
During the period of the loan you may decide you want to pay back more than you originally agreed with the lender. This is called an overpayment.
Allows you to take a break from making the monthly payments for an agreed period.
Occurs when a lender offers different customers different interest rates based on individual circumstances. Most lenders use a person's credit score, employment status, income and other outstanding debts but the process varies between lenders.
A loan that uses an individual's asset, usually their property as equity. The amount offered is dependent on the value of the asset.
Total amount repayable
The total amount you are required to repay during the loan term including interest.
A loan that isn't secured against a borrower's property. There is usually a maximum amount an individual can borrow.