6 reasons to apply for a personal loan

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A personal loan is an amount of money that a bank or other type of lender can provide to an individual based on an agreement that the borrower repays the money back in instalments over a set term. Loan repayments are usually a fixed amount paid every month on top of any interest.

There are a variety of reasons as to why someone may take out a personal loan. Here are 6 common reasons for a personal loan:

  • Buying a car
  • Paying for a wedding
  • Home improvements
  • Debt consolidation
  • A big life change
  • Unexpected expenses

 

Buying a car

If you’re looking to buy your next car but don’t quite have the money upfront, you might consider taking out a car loan. This lets you know exactly how much money you have to spend on a new or used car and gives you a fixed monthly rate of repayment so you can budget accordingly.

 

Paying for a wedding

Your wedding day should be one of the most magical and important moments of your life, and with the average cost of a wedding rising, it’s hardly surprising that couples look to take out a wedding loan to help with the expense. This could help you to cover some or all of the costs of your wedding including the ceremony, reception or other costs like the wedding dress or honeymoon.

 

 

Home improvements

Whether you’re looking to update your home with a new kitchen, or create more space with a new extension, home improvements can often be a big expense. If you’re planning a project and you don’t have the savings to complete your grand designs, a home improvement loan could help cover the costs so you can make those much needed home improvements.

 

Debt consolidation

If you have various debts and you’re struggling to keep up with the repayments, you may want to consider a debt consolidation loan. This could allow you to combine multiple debts into one manageable single payment. This could make budgeting easier as you’ll know how much you need to pay back each month. Be careful though, depending on the rate and the term (length) of the new loan, it could end up being more expensive so make sure to shop around and do the maths before making a decision.

 

A big life change

Taking out a personal loan might be an option if you need to finance a big life change. If you don’t have the savings available for this new large expense, a personal loan may be what you need to help you to make that change.

 

 

Unexpected expenses

Many things happen in life that we don’t expect and can’t plan for, so sometimes you may need a personal loan to cover the cost of a large unexpected expense. If you need money for a broken boiler or if your house needs a new roof for example, a personal loan could provide you with financial support when you need it.

 

What are the benefits of an unsecured personal loan?

  1. An unsecured personal loan won’t require security in the form of assets such as your home.
  2. The application process is simple, and the money usually arrives in your account quickly once you’re approved. With a Shawbrook personal loan, you will receive the money within 3 working days of being accepted.
  3. You can repay the money over a realistic period. Loan repayment terms are usually quite flexible but may depend on the loan amount borrowed and your personal circumstances.
  4. Loan repayments are usually in the form of a fixed amount to be paid monthly so you’ll know exactly what your payments will be every month and it’s easier to keep track of your monthly outgoings and budget. However, some lenders offer variable rates, and this means the rate can change over to time, so make sure to read and understand your credit agreement fully before you sign on the dotted line.
  5. One monthly sum is easier to manage and therefore it should be easier to keep track of your monthly outgoings and budget accordingly.

There are a number of reasons why a loan application may be rejected. You should bear in mind that different lenders have different requirements and so will have different reasons for accepting or declining an application.

 

 

Why a personal loan application could be rejected

Here are 6 of the most common reasons for a loan rejection:

  1. Insufficient income 
    Lenders will need to make sure you can afford the monthly repayments. If your incomings and outgoings show you’d be unable to afford the loan, you’re likely to be declined.
  2. Poor credit history 
    If you have a poor credit history of failing to repay debts, a lender may refuse to lend you more money.
  3. Unstable employment
    If you can’t evidence that you have a stable income, or if for example because of Covid, the sector or industry you work in has been impacted, lenders may refuse to lend you money as they’re unable to confirm you’ll be able to pay it back.
  4. Unsuitable loan purpose
    Lenders will need to ensure the purpose of your loan is responsible and they will have restrictions on how you can use the money. For example, you won’t be able to use the loan for gambling
  5. Incorrect personal details
    If you apply using incorrect details or have poor documents to support your information, lenders are likely to reject your application due to inconsistencies.
  6. You already have too many loans
    Lenders can reject you if you have too many loans.

​What is a Representative Example?

If a lender includes any reference to the cost of credit when advertising unsecured credit products like a personal loan, they must show a Representative Example. This is to help you easily compare the typical cost of the product across different lenders. For more information you can visit our Transparency page.

 

Other things to bear in mind

As you can see, there are many reasons for taking out a personal loan and if you know you can make the repayments on time, then personal loans can be a real help when you need financial support.

However, when borrowing money, it must be repaid on time with interest on top so you’ll need to make sure you can afford the interest rate and monthly repayments. Before proceeding with taking out a personal loan you should consider how much you need to borrow and can afford and read the terms and conditions carefully.

If you’d like to understand more about personal loans, read our Ultimate Guide to Personal Loans.​

 

Get a personalised quote from Shawbrook today

​We believe in being transparent and fair with everyone that applies for a personal loan with us. When you apply for an instant quote, it won’t impact your credit score and we’ll give you a clear picture of your guaranteed and personalised rate from the start.

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ALL LOANS ARE SUBJECT TO STATUS. THE INTEREST RATE OFFERED WILL VARY DEPENDING ON OUR ASSESSMENT OF YOUR FINANCIAL CIRCUMSTANCES AND YOUR CHOSEN LOAN AMOUNT. TERMS AND CONDITIONS APPLY.​