More than £37 billion of personal loans are disbursed every year in the UK. We are a country of happy borrowers, doesn’t matter we are taking a simple traditional loan, payday loans or something like no guarantor loans. However, while most of us have that desire to take a loan in common, the reason behind it is not always the same.
Also taking a loan is not always easy, at least for borrowers who have less than perfect credit score. Their application gets rejected many times due to poor credit history. But there are online lenders who provide personal loan for bad credit borrowers at a slightly higher rate of interest.
There are some frequent uses of personal loan which we will go through here:
- Consolidating Other Loans
Many people with multiple loans find it difficult to manage all the repayments as well as interest every month. A debt consolidation loan is a better way to make it easier- and can also reduce the cost of loan too. You can get a debt consolidation loan with an interest rate lesser than other loans. The loan can be used to pay off an existing loan so there is only one payment left to make every month- and less interest to pay every month. This is the main reason why maximum people are using a personal loan to consolidate their mounting debts.
- During an Emergency Situation
As we all know life is full of uncertainties and anything can occur any time like sudden medical bills, the car got damaged, education fees, etc. It’s also a fact that most of us don’t have sufficient savings to face any unexpected expenses. Around 10% of personal loan taken by borrowers are used for this purpose only. Payday loans are also very popular among borrower but due to very high rate of interest on it, people try to avoid it and go for a personal loan instead.
- Making Improvement in Lifestyle
A personal loan can be used for anything and many people choose to borrow to make their lifestyle better. For example, paying for a holiday trip is one of the main reasons in the UK that people take a loan. Other things like home repairing and improvement account for around 24% of personal loan taken by borrowers. Other popular lifestyle need for which people borrow can include paying for treats and luxury items. Most lenders started to insist that these loans should not be used for a luxury purpose. However, people are still taking loans mainly for these reasons only.
- Important Events of Life
Many people take the loan to make their big events of life like wedding, anniversary, birthdays, etc memorable. Paying for a wedding is one of the most sought after reason. Around 8% of applicants who apply for the personal loan provide the reason as a wedding.
- Starting a New Venture
Starting a new business can be very expensive and for many people getting a fund is not possible always. That’s why one of the most famous reasons for applying is to get the fund to keep running their business. It is important for a new business to have cash all the time in order to run the business smoothly.
- To Meet Everyday Needs
Around 22-24% is borrowing just to meet the daily expense and cover the cost. This could be simply using a payday loan to pay for food or borrowing a personal loan to pay overdue bills, etc.
Though there are many people in the UK who borrow for these reasons it is not recommended to take a loan for this purpose. Sometimes, to take a loan to make end meet can make a situation complicated and worse- because not only you have to repay the loan but also you have to pay the interest every month which will take a toll on your financial health.
You can take a personal loan from a direct lender for a small amount as well as a large amount. Regardless of your financial condition, the rate of interest on your personal will never be lower. If you have a good credit rating then you can get some relief, otherwise, you have to pay a higher rate of interest. You can borrow a large amount of loan if you want to consolidate your multiple loans. In case of a large amount, you have to pay a little less interest rate. Always remember to pay the loan on time; otherwise, your credit will get impacted.