Personal loans are available through many different types of UK lenders - the most obvious and most frequently used are banks and building societies.
The lump sum that you receive can usually be used for any purpose, although the application form may still require you to give information about the intended use. The majority of personal loans are used to pay for luxuries like cars, weddings and holidays, or for home improvements like extensions or conservatories. Despite this, a growing number of applicants are taking out loans to pay off existing debt; this type of loan is known as a debt consolidation loan.
The money you borrow plus the accumulated interest is more often than not paid back on a monthly basis, over an agreed period of time. The amount of interest is known as APR (Annual Percentage Rate), which indicates how much extra you will be charged each year in addition to the amount you have borrowed. All lenders are obliged by law to declare the level of interest that is charged to borrowers, so comparing different rates has become fairly straightforward. However, always make sure you are comparing like for like. For example, some companies will charge an additional fee for extras like credit insurance, so may at first appear to be less expensive that you first thought.
Because interest rates can vary to a great extent, you'll need to do your homework if you want to find the lowest rate available to save you money. However, if you have had problems repaying loans or other types of credit in the past, you may find that the companies offering the best rates simply aren't interested in lending to you. This is because some companies only offer loans to applicants with a good credit history on their credit report, as they are more likely to repay on time and therefore pose less of a risk to the lender.
If you do have a poor credit history, you should still be able to find some excellent deals, but you might just have to shop around a bit more before you find the one that is right for you.