Loans can generally be as short as six months or as long as seven years, depending on the size and nature of the lending arrangement. This is another important area to consider when looking to take out a loan, as the length will of course have a bearing on the size of repayments that are to be made. It is more common for people to take out a personal loan for around a year at the lower limit, as this will often provide more security in relation to repayments. At the upper end of the scale, some lenders will offer ten-year loans.
Another reason to do your sums in advance of taking out a loan is that lenders can include substantial penalties for paying off a loan early. In some cases it can be detrimental to your finances to pay off a loan early because of the penalties that will be incurred, meaning you may be left paying off a loan you no longer want or need for a number of months. It is standard practice among most companies to implement redemption penalties of two months' interest if you look to pay off a loan early, although some firms will insist on higher penalties.
Therefore, having a clear idea at the outset of how much you want to borrow and how long it will take to pay back can be a valuable start when looking for a personal loan, so as to avoid taking out more than is necessary and paying fines for not needing it all.
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