Personal Loan Debt & Bank Loan Debt

Personal loans or bank loans are formal agreements that lend money over a set period of time (although some lenders will allow rearrangement of repayment duration), in which the borrower makes a set monthly repayment at a certain interest rate. This type of debt is very common to purchase cars or other expensive consumer goods, not to mention completing higher education. Usually, personal loans can be borrowed for any reason, even debt consolidation.

Understanding personal loans

A loan from a bank, building society or money lender is a formal agreement that is usually spread over a set amount of time. The borrower makes monthly repayments to the lender, including interest. At the start, it is important for borrowers to clearly understand the amount they are borrowing, how long the loan lasts for, and how much interest is owed.

Unsecured personal loans

An unsecured personal loan is a non-priority debt, in that the borrower will not lose their house or be imprisoned for failing to pay off the debt. However, like all debt, personal loans are serious, and can end up with the borrower in court if repayment problems are encountered.

Managing loan repayments

Like all debt, the key if you think you cannot manage loan repayments is to contact your lender. The lender, particularly if they are bound by the Banking Code, should look at the agreement with sympathy. Options can include changing the rate of repayment, providing a repayment holiday, or extending the loan terms.

Missing loan repayments

Missing a loan repayment is a serious sign that your debt may be becoming unmanageable. Regularly missing repayments can cause your lender to take you to court and issue a County Court Judgement, which can affect your credit record. However, many banks and lenders will be prepared to negotiate.

Loan disagreements

You may disagree with something relating to your loan. Disputes can easily arise regarding the terms of the contract, interest rates, extra charges and fees and many more unexpected changes. The bank should be given eight weeks to deal with a complaint before giving a final decision on the matter. If you remain unhappy, take your complaint to the Financial Ombudsman Service.