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What is a personal loan?

Written byKoyo Loans
Last Updated1st December 2022
Contents
  • In 30 seconds…
  • Introduction
  • What is a personal loan?
  • How much can I borrow on a personal loan?
  • Where to get a personal loan fast?
  • How likely am I to get a personal loan?
  • How long do personal loans take to come through?
  • Conclusion

In 30 seconds…

A personal loan is a credit option that you can use for various purposes. You can borrow a specific amount of money at a fixed rate of interest and agree to pay it off over time. Most personal loans are available for amounts between £1,000 and £25,000 and can be used to buy a car, consolidate debt, or make home improvement projects, among other things. Personal loans are often approved within 48 hours, offering you quick access to credit, and if you have a fair or good credit score, you should be eligible for a personal loan.

Introduction

Applying for a personal loan is one of the quickest and easiest ways of accessing the credit that you need. Personal loans can also be used for various purposes, such as renovating your home or financing a new car. So, with this in mind, we answer some key questions relating to personal loans below, to help you decide if this type of credit is right for you.

What is a personal loan?

personal loan is a type of credit that you can apply for to help you spread the cost of a purchase or consolidate your debts. As they usually have lower interest rates than credit cards and other loan types, personal loans are a viable option for lots of borrowers.

Fundamentally, a personal loan enables you to borrow a fixed amount of money at a fixed rate of interest. Once approved, you will receive the funds as a lump sum, usually within a day or so of applying. You are then responsible for making the pre-agreed monthly payments until you have paid the personal loan off in full. Lenders set their own repayment terms and interest rates, so it’s essential to do your research when looking for an affordable personal loan.

What’s more, personal loans can be secured or unsecured. A secured personal loan means that the lender takes one of your assets as security (often your home) in case you fail to make the required repayments. On the other hand, an unsecured personal loan doesn’t require an asset as security, but you can usually only apply for smaller amounts of money (typically up to £25,000).

How much can I borrow on a personal loan?

Although every situation is different, you can usually borrow between £1,000 and £25,000 when you apply for an unsecured personal loan, depending on the lender. However, there are multiple factors that affect your eligibility for a personal loan, which in turn influence how much you’re able to borrow.

Most importantly, your credit history is usually an essential factor in the loan underwriting process. A higher credit score indicates that you’re less at risk of defaulting on your loan, which may help you qualify for higher loan amounts and lower interest rates. However, Koyo Loans also uses Open Banking data to fairly assess your application. Lenders also look at your current income and debt when ascertaining whether to approve you for credit and are likely to calculate your debt ratio before making a decision about your suitability for credit.

The amount that you can borrow is also influenced by the lender’s loan offerings. For instance, Koyo Loans offers unsecured personal loans of between £1,500 and £12,000. 24.9% APR Representative. You can use our loan calculator to see how much you can potentially borrow and the rate of APR you are likely to pay for your Koyo Loan.

Where to get a personal loan fast?

The best place to get a personal loan fast is from an online lender, such as Koyo Loans. They take one full working day to review all loan applications, and if approved, we will deposit the funds into your bank account the following day. So, you can expect a decision and your funds within 48 hours.

Depending on the lender you opt for, personal loans can take anything between one and five days to be approved. Banks and building societies may take longer than online lenders, and it might be several weeks from your date of application until you receive the loan amount in your account. Therefore, you need to conduct sufficient research before settling on a loan provider if you need access to the money quickly.

When you’re looking for fast access to credit, it’s crucial not to just accept a loan from the first company that you come across, particularly if it’s a payday loan. You need to fully understand the APR and all the repayment terms before applying for a loan so that you’re not stung by extortionate terms when you come to repay the loan amount.

How likely am I to get a personal loan?

The likelihood of your personal loan application being approved depends predominantly on your financial history. If you have a good credit history and score and are viewed as a low-risk borrower, you’re much more likely to have your personal loan application approved.

In the UK, most lenders turn to one of three credit bureaus – TransUnion, Equifax, and Experian – to find out your credit score. Your score is then used to determine whether or not you’re a good candidate for a loan. Other lenders – Koyo included – utilise Open Banking data to gain a fairer picture of your suitability for credit.

Open Banking enables lenders to discover accurate, real-time data relating to your current finances, as opposed to just what a third party says about your suitability for credit. In many cases, your application for a personal loan is more likely to be approved if you apply to an Open Banking lender, but it’s worth noting that your credit history is still important. So, being responsible with your finances and maintaining a good credit score will enhance your chances of approval.

How long do personal loans take to come through?

Most personal loans take anywhere between one and five days to be approved and deposited into your account. At Koyo Loans, we decide on your application and deposit the funds into your account (if approved) within 48 hours.

Still, it’s important to realise that all lenders operate slightly differently, so you might have to wait longer than this for your funds to come through, particularly if you apply for credit from your bank or building society. Equally, you might come across online lenders that provide same-day funding, so researching the market is important.

To ensure your application is reviewed and approved as quickly as possible, upload all the relevant information to support your loan application and be careful when filling out the online form. Mistakes will lead to delays in the approval of your application, so if you need to access a personal loan quickly, make sure you’re diligent when completing the application process.

Conclusion

As you can see, personal loans are a suitable option for many borrowers and could be ideal for your specific situation. They’re often flexible, affordable, and can be used for a variety of purposes.

Koyo Loans is the trading name of BETR Technology Ltd. Company No. 11483187. Registered Office: Huckletree Soho, Ingestre Court, Ingestre Place, London, W1f 0JL

Key Takeaways

So, are personal loans worth it? It depends on your own situation. Personal loans can be a great way to access relatively small amounts of credit – usually up to £25,000 – and they’re flexible, meaning you can use them for a variety of reasons. Whether you’re hoping to consolidate your debts or spread out the cost of your upcoming holiday, a personal loan is a viable credit option for you.

You can easily apply for a personal loan online, and most lenders consider your application and give you their decision within 1-2 days. This makes personal loans a relatively quick form of credit. Your eligibility for a personal loan will predominantly depend on your credit history, and borrowers with fair credit scores or better are likely to be accepted. Some lenders, such as Koyo Loans, use Open Banking to get a clearer picture of your current financial circumstances, which can increase your chances of being approved for a personal loan.

Ultimately, personal loans could be a useful option if you’re looking to borrow money for an upcoming purchase and you want to spread your repayments over a pre-determined period of time.

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