A personal loan is a fixed sum you borrow and repay in regular instalments over an agreed term, usually with a fixed interest rate. They're commonly used for things like car purchases, home improvements, or consolidating other debts — anything where you need a defined amount rather than ongoing flexible borrowing.
Understanding APR
The Annual Percentage Rate (APR) represents the total cost of borrowing over a year, including interest and most standard fees, expressed as a single percentage — it's designed to let you compare different loan offers on a like-for-like basis. Lenders are required to advertise a "representative APR", which only has to be offered to at least 51% of successful applicants — the rate you're actually offered can be higher depending on your credit profile.
Secured vs. unsecured loans
Most personal loans are unsecured, meaning they're not tied to a specific asset like your home. Secured loans use an asset (often your property) as collateral, which can allow for lower rates or larger amounts, but puts that asset at risk if you can't keep up repayments — worth thinking carefully about before choosing this route.
Early repayment
Under UK consumer credit rules, you're generally entitled to repay a personal loan early, though the lender can charge an early repayment charge (typically capped at one or two months' interest). If you think you might want to clear the loan ahead of schedule, it's worth checking this cost before signing.
Before you apply
Checking your credit report beforehand can help you understand roughly where you stand, and using an eligibility checker (which typically uses a "soft" search that doesn't affect your credit score) before formally applying can help you avoid multiple hard searches, which can themselves affect your score if you apply to several lenders in a short space of time.