Remaining solvent in a recession with a sensible personal loan


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The Independent Online

Difficult times lie ahead for the UK: the prediction of a double dip recession has now officially been realised and growth projections – even the most optimistic ones – are underwhelming at best.

That said, despite the ostensible gloom, it’s important to retain perspective and there are some positive signs too: the economy, although stagnant, isn’t experiencing the same declines that were seen during the global economic crisis of 2009 and unemployment unexpectedly fell in April.

Regardless of the mixed signals, it’s important to remain responsibly solvent throughout these erratic economic times and securing a personal loan is one way to keep the money flowing. And now’s a good time to borrow: bank loans are becoming more common as the Government moves to make loans to small businesses and individuals more common.

Before deciding on the options though, it’s important to borrow sensibly. Much of the financial crisis was derived from individuals and governments borrowing irresponsibly, resulting in the high debt levels that are still contributing towards the financial chaos that we see today.

Here are three tips on how to borrow responsibly to and make sure that the debt isn’t going to be crippling.

Make sure the loan is unsecured

An unsecured personal loan is one that does not require possessions or assets to be guaranteed against the loan before it is offered. This type of loan is, naturally, the opposite of secured personal loans – which do require the securement of assets, such as a property, instead of using customers’ credit ratings as the main frame of reference.

Secured personal loans can increase the likelihood of getting a loan, but are usually a secondary option if you’re looking for a sensible amount of money and have a decent credit history, as the secured option could put personal security at risk, unnecessarily, at a time when the future is already unpredictable.

Get the best possible interest rate

Obviously, it’s important to get the best interest rate to make sure that a loan is sustainable and affordable.

There are many websites and online services that can help you to find the best deals - too many to mention in this article - but it’s also worthwhile going directly to banks to find deals and rates that aren’t included by the aggregators: it’s a misconception that price comparison websites include all available deals – they often don’t.

Interest rates under 8 per cent are generally cheap and some banks, such as Clydesdale, are offering unsecured personal loans at rates as low as 6%.

Make sure your credit rating is in good shape

Building on both of the points above, you’ll stand the best chance of getting an unsecured personal loan at an affordable interest rate if your credit rating is desirable. If not, your ability to secure a loan will be limited.

The first step towards making sure your credit rating is in good shape is to understand it, and there are a few online services, such as Experian, that allow personal credit ratings to be checked for free.

After that it’s generally a case of avoiding late payments and making sure that all credit is paid back on time – but the simple act of adding yourself to the electoral roll will also help to increase your credit rating by increasing your superficial legitimacy as a UK citizen.

It’s important to be solvent, but it’s equally important to borrow sensibly. Sticking to the three tips above will help you borrow sustainably during these unpredictable and difficult times.

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