A personal loan is a way to borrow money and spread the cost of repayments over a set period of time. This can help to spread the cost of a purchase over a number of months or years.
When you take out a loan, you’ll need to pay interest on it. This means you’ll pay back more than you initially borrowed. Interest is calculated as a percentage of the original loan amount and is essentially a fee charged by the lender for letting you borrow their money.
Applying for a Vanquis Loan
We may offer loans directly to eligible Vanquis credit card customers via email, SMS or through the Vanquis Bank App.
If you're new to Vanquis, you can use our online loan calculator to see if a loan would be right for you and if you're happy you can then apply online. To apply you'll need:
- your address details
- information on your income and outgoings
- details for any current credit agreements such as other personal loans or credit cards
How does a personal loan work?
A personal loan gets issued as a lump sum which gets deposited into your bank account. Borrowers need to pay back the loan over a fixed period at a fixed interest rate. The payback period can vary from one lender to the next. A personal loan is either secured or unsecured. While choosing a secured personal loan, borrowers have to offer up collateral or an asset worth the borrowing amount if they can't pay the money they owe back. If borrowers default, the lender gets that asset. At the same time, collaterals are usually not needed in case of unsecured personal loans. If you delay the repayments of an unsecured personal loan, it can damage your credit score, and the lender can take action against you for collecting the outstanding debt, interest and fees.
Personal loans are available for any purpose. This means that, unlike a mortgage or car finance, you can use the money you borrow for anything you need. Some of the most common uses of a personal loan are:
- Home Improvements - Including a new kitchen or furniture
- Emergency Expenses - Including car repairs or a new boiler
- Debt Consolidation - Paying off other borrowing to reduce interest payments
Personal loans aren’t available without a credit check, but there's a way to find out if you’re likely to be accepted for a loan without affecting your credit score.
If you use an eligibility checker before applying, this will run a soft credit search to give you an initial decision on whether you can apply. This isn’t a guarantee your application will be accepted, but if you’re turned down at this stage it means you can't apply.
Although this soft search will be recorded on your credit file, it won’t be visible to companies and so won’t have an impact on your credit score. If you carry on with the application, your lender will run a full credit search and this will affect your credit score.
Most lenders typically offer an eligibility checker of sorts on their websites.
Before you apply for a UK personal loan, you’ll need to make sure you meet your lender’s eligibility criteria. Though this can vary from one lender to another, typically it will include these points:
- You must be at least 18 years old (For a Vanquis Personal Loan you must be at least 20 years old)
- You must be a UK resident
- You are not legally restricted from obtaining credit e.g. because of bankruptcy
- Affordability criteria, this is based on your incomings and outgoings. Lenders need to ensure that taking out a loan with them doesn’t put you at any risk to your existing financial commitments
- You should be aware of your credit score before applying as a lender will look at this when you make your application
If you're eligible to apply, lenders generally take some additional details, such as how much money you bring in and spend each month, as well as details of any dependents. They use this extra information alongside a full credit check when making a decision on your application.
If you have a bad credit score, you may find that this limits your options when applying for a loan. But you may still be able to borrow money as some lenders offer personal loans to people with poor credit which are designed for this exact situation.
Personal loans designed for those with an indifferent credit history typically have low borrowing limits and high interest rates, to ensure they’re affordable and reflect the additional risk to the lender. If you make all your repayments on time, this type of loan could help you rebuild your credit history and improve your credit score.
What are the alternatives to personal loans?
If you need to borrow money, an unsecured personal loan isn’t always the only option. You should always consider your own personal circumstances and the purpose of your loan, however here are some alternatives:
- Credit cards - If the strict monthly repayment terms of a loan might cause you problems in the short term, credit cards allow you to repay a higher or lower amount each month, depending upon your circumstances.
- Overdrafts - If you need short-term funding, an overdraft allows you to take a certain amount of money from your bank account if you don’t have sufficient funds in place.
- Secured loans - If you need to borrow a large amount or you think you might be turned down for a personal loan, a secured loan could give you a better chance of acceptance or allow you to borrow more, as you’ll need to put up property or possessions as security against non-payment.
Things to consider before taking out a personal loan
If you’re thinking of applying for a loan, you first need to consider how much you can realistically expect to repay each month and overall. If you can’t keep up with your repayments, you can damage your credit score and your lender might take action against you to recover the debt.
You’ll also need to consider how much interest you’ll pay on the loan, and if the fees are unreasonably high, it might be worth considering other options.
Personal Loans FAQs
Can I get a 'Personal Loans' loan 'without a guarantor'?
Yes. Some lenders do offer unsecured personal loans, which means you don’t need a guarantor to act as security against missed repayments. But remember that missing repayments will have a negative impact on your credit score and could affect any future applications for credit.
Will applying for a personal loan affect my credit rating?
Yes, applying for a personal loan will affect your credit rating, regardless of whether your loan application is successful. This is why we recommend running an eligibility check before you proceed with any application for credit.
What happens if I miss a personal loan repayment?
If you miss a personal loan repayment, a record of the missed payment will be noted on your credit file. This will have a negative impact on your credit score. If you miss a number of consecutive repayments, your lender may default your account and start debt recovery proceedings against you. This will further damage your credit score.
What happens if I can’t repay my personal loan?
If you can’t repay your personal loan, you need to speak to your lender as soon as possible to come to an arrangement over repayments. If you ignore the situation, your lender may default your account and start debt recovery proceedings against you. This could lead to you having a County Court Judgement on your credit file, which will affect your ability to get credit and stay on your report for six years which can have a negative impact on your credit file.