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CREDIT CARD GUIDE

Unsecured personal loan

A personal loan available from a bank, building society or other financial institution without security. They are usually covered by the terms of the Consumer Credit Act.

A lump sum will be loaned in return for you agreeing to make regular repayments usually by direct debit. Personal loans are available from £500 up to £25K (security will usually be needed for loans of large amounts) and are repayable over a period of time, usually between 6 months and 10 years.

Lenders charge interest, which can either be fixed or variable, on the amount borrowed. This interest charge is expressed as an APR (annual percentage rate). The APRs will vary dependent upon the amount of the loan and sometimes the term as well. Usually the rate is fixed on your loan repayments and will remain the same throughout the period of the loan. It may be variable, particularly in the case of longer term loans, and you must be advised of this possibility at the outset.

Payment Protection Insurance

This is an insurance that will cover your monthly loan repayments in the case of unemployment, accident, sickness or death. There are sometimes different levels of insurance providing different cover so it is important to check the small print to ensure the cover provided is suitable for your needs.

Secured personal loan

A secured personal loan is one in which some of your property (home, stocks and shares, etc) is held, by the lender, as security for the amount you have borrowed. Secured loans usually offer lower interest rates than unsecured ones.

An unsecured car loan

An unsecured car loan is a personal loan offered solely for vehicle purchases.

An unsecured deferred car purchase loan

An unsecured deferred car purchase loan offers the borrower an option of finance for a vehicle. With an UDCPL a borrower sets up the loan with a financial institution, not necessarily with the manufacturers' finance house. Essentially a percentage of the loan is deferred until the end of the term at which point it has to be repaid. Typically the term of the loan will be between one and four years. So, for example, a loan over one year could be deferred by say 60 per cent. Once the loan is repaid in full, the car is fully owned and can be used, for example, as a deposit for another car loan




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