The Ultimate Personal Loan Guide Chapter Eight - The Ins And Outs Of Unsecured Loans

Everything is in place! You know the amount and from whom you want to borrow your unsecured loans. But do you know your rights? Find all the useful information you might not have thought of in this chapter of the Personal Loans Now Guide.

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Learning Highlights
  • Online applications for unsecured loans,
  • Receiving the funds,
  • Cancelling within the cooling off period,
  • Cancelling within the cooling off period,
  • Notice of cancellation and repayment,
  • Repaying a personal loan early,

Unsecured Loans: Basic Facts

In this article, Personal Loans Now focuses on some of the basic facts that relate to unsecured loans. For those new to borrowing from mainstream lenders, this article is useful for you. You can find out how the money will be paid to you, how you make repayments and lots of other useful stuff.

Unsecured Lenders: It’s All About The Money

There is a lot of information available about unsecured loans. For example: how to apply for an unsecured loan; how to get the lowest personal loan interest rates and how to avoid the pitfalls of extra charges or disreputable lenders. However, there are other aspects to borrowing that first timers need to know.

So, you think you are ready! You have decided how much money you need to borrow, found a reputable lender, got a good deal on the interest rate and are ready to go ahead. You have worked out how much it is going to cost to borrow and are confident that you can afford the monthly repayments. Your credit record is good, and you have sent off your application. What happens next? Do you know all you need to know about taking out an unsecured loan?

Unsecured Loans - Personal Loans Now

Online Applications For Unsecured Loans

An online application is often the simplest way to apply for a personal loan. If your credit record is good and you get instant approval, you will get an immediate reply. It will often advise when the lender will send the money to your bank account.

If you have applied online and the lender needs more background facts, they will ask you for back up documentation or simply more information.

Unless you have used your chosen lender before, you will need to send proof of identity, address and income. Income can include salary, pensions and disability living allowance. Other income taken into account is child maintenance that has been agreed through a court, any employer’s allowance for housing costs, child tax credits, working tax credits and child benefit.

How Soon Will I Receive The Funds From A Personal Unsecured Loan?

The days when a loan would be paid out in cash are long gone. To qualify for a personal loan, you will need a bank account. Once the lender accepts an application and agrees to the terms, they will fund the loan into this account.

Unsecured Loans - Personal Loans Now

The process of acceptance is usually very fast. You should receive the money within five days of your original application as soon as you have received, signed and returned the necessary documentation. Applicants who apply online and who do not need to produce documentation will get the funds faster.

An application will remain an agreement in principle until the lenders complete the credit assessment process. They may ask you for further information to support your application. This will affect the final decision

One point to note is that some lenders offer a courier service to deliver the loan agreement and pick up further documentation. Be aware that this service comes at a cost (around £50) and they may add this sum to the first monthly payment on the loan.

How Is The Money Transferred?

The advent of the Faster Payments service that most UK banks now use means that funds appear in your bank on the day you finalise the agreement. The electronic payment means that funds are immediately available and there is no need to wait for clearance. When the money is in your bank, you are free to spend it straight away.

Cancelling A Contract For your Personal Unsecured Loan

Have you signed a contract to borrow money, received the funds in your bank and then developed some second thoughts? If this happens, there is no need to panic.

Contracts can be verbal or written. Although you may have applied for your loan by phone or online, it is usual to receive a written contract to sign. The contract should be carefully read including the boring small print as this can prevent problems later on.

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Unsecure loan – Cooling Off Period

Signed contracts are legally binding and may include a financial penalty if you do not keep to the terms. However, financial contracts in the UK always include a cooling off period. During this time you are within your rights to change your mind about borrowing and to cancel without any extra charges. There is no need to tell the lender why you have changed your mind.

The Cooling Off Period for personal loans is 14 days from the date the lender concludes the contract or the date that you receive a copy of the agreement. This regulation applies to other kinds of lending including credit cards, hire purchase agreements, business loans and even pawn broking agreements.

If you borrow from an illegal lender (loan shark) you won’t have any rights under the Consumer Credit Act so try to avoid borrowing in this way – Citizens Advice Bureau.

Often lenders do not mention the right to a cooling off period in large print on the agreement. Nevertheless, it applies to all loan.

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Cancelling An Agreement

If you do want to cancel the agreement for an unsecured personal loan, there are two ways to do this. You can cancel verbally or in writing. Financial advisors all agree that cancelling the contract in writing is the better choice. But a verbal cancellation will be upheld as loan companies should always record telephone instructions.

The right to cancellation does not apply to small loans of £50 or under, mortgages, secured loans or bank overdrafts. These contracts and those with credit unions or employer loans are not covered by the Consumer Credit Act.

Consumer Credit Act do not cover these agreements:
  • agreements to rent gas, electricity or water meters
  • agreements where you have to pay off what you owe in full each time, for example, charge cards or milk bills
  • mortgages
  • credit union loans
  • loans from an employer
  • some short term trade agreements
  • A Green Deal Plan which provides the credit of: up to £25,000 which is wholly for business purposes or over £25,000 which is predominantly for business purposes.

Your rights for these agreements will only depend on what is written in the contract, not on what is in the Consumer Credit Act

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Personal Loan: Notice Of Cancellation

If you have decided to cancel your the call and it is within the 14-day cooling period, you must give notice of withdrawal to the lender. This can be done verbally, by email or by post. If the lender included a cancellation form with the contract, you could use this form.

Keep a record of all correspondence relating to the loan. As long as you send your cancellation before the end of the cooling off period, it is irrelevant when the lender receives it. For safety and to prevent unnecessary disputes, it is a good idea to send the cancellation by recorded delivery. There is no necessity to give any explanation about why you have changed your mind.

A lender that refuses to allow you to cancel or a lender that ignores your letters is breaking the law. If this happens and you are not getting anywhere with your complaint you can refer the matter to the Financial Ombudsman.

Repaying The Loan On Cancellation

The lender will advise you how to repay the sum that you borrowed. This will include the interest that has accrued since you received the funds. You will have 30 days from the date of cancellation in which to make the payment.

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Repaying a Loan After The Cooling Off Period

If you want to repay a personal loan and the cooling off period has come to an end, you can ask the lender for a settlement figure. This is when the small print of an agreement comes into play. This is why it is vital to read the contract before signing. Some contracts stipulate that only a partial repayment is allowed and a full repayment will attract a financial penalty.

However, these are usually older contracts. Anyone who has taken out a loan after February 2011 can repay up to £8,000 per year without incurring any extra charges. A full settlement figure from the lender will include interest up to the settlement date. The lender is obliged to send you a settlement figure within 28 days of your application.

Summary: Unsecure Loans

Personal Loans Now relates to receiving the funds from a personal loan, how to cancel within the cooling off period and how to make early repayment of a loan.

 

Unsecured Loans