People use personal loans for a variety of purposes, either affording the holiday they want or for that new car that they need, one of the most common uses is to consolidate their existing debts they have in the form of credit and store cards.

There are several different things you should consider before committing to a personal loan. You need to think what you want the money for and how long you want the repayment period to be. Also the amount you wish to borrow will affect the interest rate and should be a primary consideration.

The type of loan available to you largely depends on the purpose for which the money is required and the amount of money you wish to borrow. Typically amounts over £25,000 tend only to be available as secured loans. These are usually taken out by homeowners or people who have some collateral for which the loan can be secured against.

By collateral they mean something that can be liquidated into cash should the borrower default on the loan, the lenders need to be sure that they can realise their money back should the repayments cease. In the vast majority of cases the loan is usually secured on a house owned by the borrower.

Unsecured loans do not require the borrower to have any collateral; they are assigned purely on the credit worthiness of the individual. They tend to be for less and represent less of a risk to the lenders.

The main aspect of loans that people look at is the interest rate for borrowing the money it is the most important part as it will determine how much you have to pay back by the end of the agreement. All the competing lenders advertise their loans by the interest rate and it is what everyone goes by when trying to find a good deal on a personal loan. Beware of low introductory rates that seem good but then when the introductory period is up, the sky high interest rate comes in making it a worse deal than you thought. The other thing to be aware of is that the interest rate advertised is not necessarily the one you will be eligible for, as was mentioned earlier you are assessed on you financial history, so you may qualify for the loan but at a higher interest rate than the advertised rate.