Beginner's guide to: Personal loans

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The Independent Online

How do I get a personal loan?

The easiest way is to approach the lender directly. Most have application forms you can fill out on the web. If you don't have internet access, you can go to your local bank.

How do I know who offers the best rates?

Comparison sites such as moneysupermarket.com and moneyfacts.co.uk allow you to search for the best deals, or look at the tables on this page. Be aware that the rates usually quoted in newspapers are for loans of £5,000, or even £10,000. If you want to borrow less, the rates will be higher.

What is the "APR"?

APR – annual percentage rate – is a standardised way of calculating a loan's interest rate. But beware; the advertised rate may not be what you get. If it is advertised as the "typical APR", it must be offered to at least two-thirds of successful applicants. But one-third of loans could be offered at a higher rate.

Do I need a good credit record to be accepted?

In the current market, banks are less willing to lend to people with poor credit histories. However, even with a less than perfect credit record, it's still possible to get a loan if you're willing to pay a high rate of interest. It's worth checking your credit rating before you apply. The credit agencies Experian and Equifax will send you a copy of your credit report for as little as £2, or you can check your file online for a slightly higher fee. If there's any inaccurate information on your file, you can ask for it to be removed. You can add notes to your file to explain any black marks.

Will my credit rating be affected if I am rejected?

If you are rejected for a loan, it is not recorded on your file. However, each application is recorded. If you make a lot of applications in a short period, you are more likely to be rejected – so only apply to lenders you think will accept you. Moneysupermarket.com lets you tailor your loan comparisons to the quality of your credit file.

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