While secured loans, like mortgages, are fixed to an asset – typically the home itself – personal loans are not, which is why they’re also known as unsecured loans.
There are two main loan types:
Explore: How to manage your loan repayments
You can choose how long you’d like to take to repay the loan. In some cases, you can make overpayments or repay the loan in full before the end of the agreement without penalty. If this is something you'll want to do, check there are no early repayment charges on any loans you look at.
If you’re experiencing financial difficulties and you’re worried about making your monthly repayments, you should let your loan provider know as soon as possible.
At HSBC, we can offer support based on your individual circumstances. Please be aware that the support we offer may affect your credit score. For more information, please visit our money worries page.
Personal loans can be useful when you want to borrow a relatively large amount, and would like more time to pay it back. A credit card may be more suitable for short-term borrowing.
Personal loans can offer the opportunity to borrow more money than would be available using a credit card, sometimes as much as £25,000. Interest rates are also usually lower than they would be with a credit card, although they do vary.
You might consider a personal loan to spread the cost of a big purchase like:
Personal loans can also be used to consolidate existing debts into one monthly repayment. This can make it easier to manage your money, but bear in mind that extending your debt could mean you end up paying more interest.
Each loan is advertised with a representative Annual Percentage Rate (APR), which you can use to quickly compare loans. This includes the interest rate, as well as any arrangement and other standard fees.
Remember, the representative APR advertised isn’t necessarily the interest rate you’ll get. The interest rate you get will depend on your personal financial circumstances, including your credit history.
When choosing a personal loan, other things may also be important to you, such as how quickly you receive the money into your account, or the flexibility to make overpayments.
When you apply for a personal loan, you’ll need to have a good understanding of all the costs you need to meet. For example, if it’s a new kitchen – you should budget for the entire project, including materials and installation costs.
Once you’ve figured out how much you need, it’s time to look at how much you can afford to pay back each month. Taking the loan out over a longer period may reduce your monthly repayments, but you may pay more in interest over the full term of the loan.
Use our loan calculator to look at different scenarios and decide how much is right for you.