Introduction

UK personal debt levels are a “time bomb” that poses a threat to millions of households. The level of debt at the moment stands at £1 trillion, which means that about 15 million people are exposed to external shocks such as a sharp rise in the oil price, which would in turn affect their utility bills. The figure above regularly features in UK newspaper headlines and news bulletins.

There’s no doubt that debt is a serious issue and it’s more important than ever to manage your personal finances carefully. But we live in a credit based society and, used sensibly, a personal loan can help you respond to unforeseen events, improve your standard of living and ride the financial ups and downs of life. Indeed, without borrowing there are many purchases like homes, cars and household appliances which many people would never be able to afford.

This guide has been created to provide you with answers to borrowing; however, everyone’s circumstances are different when it comes to money, so these guidelines may not apply to you. Our overall aim is to give you sound guidelines for considering a personal loan.

Manage your money smartly

To benefit from any financial advice, it’s essential you are realistic when working your current financial position.

A piece of advice would be to monitor your spending, this way you’ll be able to identify where your money is going and where you can make cutbacks. It is important to list your combined income against any large expenses such as weddings, university, holidays as well as your regular outgoings like bills, entertainment and housekeeping costs. This will enable you to draw up a basic monthly budget.

A positive sum each month means that you have extra funds to save or pay towards credit cards bills. On the other hand, if you’re left with a negative figure (your spending is higher than your monthly income) you should jump straight to the section on managing debt.

Personal circumstances

Your personal circumstances and current financial position will determine the kind of loans available to you and the rates on offer. Lenders tend to calculate the risk of lending money based on the likelihood of being repaid without any problems and borrowers who are considered higher risk will usually incur a higher interest rate on their loans.

It is really important that you are on top of your own financial position. A good start would be to list all the things you spend money on regularly, details of any existing credit commitments and how much money you have coming in each month.

Learn more

Learn more about smart borrowing by clicking through the sections of this guide on the right-hand side of this page.