How do loans work?
A loan is a sum of money which is lent to an individual by a lender such as a bank, building society or other direct loan lender. Before you take out a loan, you might have some questions about how they work. We’ve created a helpful guide to explain this here:
Applying for a loan
With many personal loan providers you do have the ability to check if you’re likely to be accepted or not through the use of an eligibility checker. This usually involves a soft search credit check which doesn’t impact your credit score. If you use our eligibility checker, we initially complete a soft search, although if you choose to complete an entire application, this will require a full credit check which will show on your credit file.
When you take out a loan, you will agree a term over which you will repay it, typically 1 – 5 years for a personal loan. Before you sign your credit agreement, if it’s a fixed rate loan you'll see how many monthly repayments you will need to make, how much your monthly repayments will be and the total amount repayable. On a variable rate loan this may differ. With 118 118 Money, our loans range from £1,000 to £5,000 over 12 -36 months.
Charges for borrowing
When borrowing a loan, there is also a charge for borrowing the money, this is known as the interest rate. When you repay the loan, you’ll repay the loan amount plus the interest. The annual percentage rate (APR) on a personal loan is a combination of the interest rate and any associated fees with the loan.
Your credit agreement
An agreement will be supplied, detailing all of the terms and conditions of the loan, including the APR, the loan amount, the repayment terms and time over which the loan will be repaid. This is called a credit agreement and you should make sure you are happy with the terms of that agreement before you go ahead.
Impact on your credit file
Your lender will share information with credit reference agencies. Making your payments in full and on time may have a impact on your credit file. However any missed or late payments can have a negative impact.
What can I use a loan for?
Loans can have various uses ranging from home renovations to buying and spreading the cost of a purchase. For example when buying a car, a loan can help with the cost by spreading the repayment over the agreed period. Home improvement loans are also a popular reason for people taking out loans. Sometimes personal loans can also help to cover unforeseen emergencies.
However, a loan is a serious financial commitment so what you plan to use it for should be a thoroughly considered undertaking. You should do your research, and also ensure that you are able to keep up with the agreed repayments over the term of the loan.
Why choose a loan from 118 118 Money?
With 118 118 Money you can borrow £1,000 to £5,000 (subject to affordability) and repay it monthly over a term of 12 - 36 months. Our loans are unsecured, and our eligibility checker will let you know if you’ll be accepted or not without impacting your credit score and before you complete a full application.
We also consider applications from those with a less than perfect credit history, so if you think you have bad credit, use our eligibility checker to see if you’re likely to be successful.
This does not impact your credit score unless you complete a full application. The interest rate you get will depend on your own circumstances.
See what our customers think of us by reading our reviews - we are currently rated 4.8 stars out of 5 on Trustpilot. (Correct as of March 2022)
Can I get a bad credit loan?
If you have had difficulties managing credit previously, or if you haven’t been able to make some of your credit repayments on time in the past, you could find it difficult to get approval for new credit from some lenders. You may be resigned to thinking a payday loan or a ‘bad credit loan’ are the only options available.
But having bad credit doesn’t necessarily mean you can't get a loan; some providers may still be willing to lend to you.
118 118 Money do consider applications from those who may have had credit issues in the past, you can use our eligibility checker to see if you’re likely to be accepted or not. The eligibility checker feature doesn’t impact your credit score; however, should you choose to complete a full application, we will conduct a full credit search.
If you do have bad credit and you take out a loan, then you can use this as an opportunity to improve your credit score – make all of your repayments on time and manage any other credit line(s) you may have responsibly, and it might help you build a better credit report!
When are loans paid back?
When loans are paid back, and how long it takes you to repay your loan will depend on what you agree with your lender. When agreeing a repayment term, your income and expenditure is reviewed to make sure the loan is affordable over the term which is offered to you. You may have a time period in mind, but if your lender’s affordability assessment determines that the repayments are not affordable for you, a longer term may be suggested or they may not be able to offer you a loan at that moment.
Are there any alternatives to a loan?
There are alternatives available if for whatever reason you don’t think a personal loan is the most appropriate option for your circumstances.
A credit card is one such option. A key difference between a loan and a credit card is that with a card you can choose to utilise up to the credit limit or any amount below. So if you don’t require a large amount of borrowing, a credit card can be viewed as an alternative. The extent to which you consider this an alternative will be dictated by your own personal circumstances. Some credit cards can come with a lower interest rate than a loan. But your own credit score will be considered which influences whether you’re eligible for a card or not. You can use the 118 118 Money Credit Card eligibility checker or head over to our credit card page for more information on what we offer.