Personal Loans

The majority of personal loans under £25,000 are unsecured. This means you don't have to give the lender security (e.g. your home or car) against the loan, so there's less chance of losing your property if you cannot keep up the repayments. However, that's not to say a lender can't take legal action over an unpaid debt and try to seize property from you, it's just a more long winded process compared to a secured loan. Interest, hence repayments, on unsecured loans are usually fixed.

You'll have to provide the lender with security for the debt, usually your home if you own or have equity in it. This has serious implications if you can't keep up the loan repayments - you could lose your home. Secured loans are best avoided unless you have no other viable options. A better option might be to consider re-mortgaging your home if it's worth more than your current mortgage. While a mortgage is still a type of secured loan, the interest rate is likely to be lower.

Some lenders allow you to pay more than your usual monthly payment, which could reduce your loan term and overall interest payment. This can be a good idea if you have spare cash, but always check that any penalties are not prohibitive and that it does reduce the term of your loan - else overpaying would be of no benefit.

As with payment protection on other types of borrowing, be very sceptical. Although protecting your loan repayments should you have an accident, fall ill or lose your job might seem comforting, cover is often limited and you could pay an arm and a leg for the privilege Claims usually only payout for up to 12 months and you can generally only make accident/illness claims after you've been off work for 14 - 30 days.

Most lenders charge around £10 - £30 per month per £100 of monthly repayment covered, whereas shopping around independent providers could cut this to £5 or less.

Thankfully the Competition Commission is trying to prevent lenders selling overpriced PPI policies alongside loans. It's proposed a ban on lenders pushing PPI policies within seven days of selling a loan.

Find out how much PPI could cost you using the Candid PPI Comparison Calculator.

Some lenders allow you skip repayments for a month or two if you're strapped for cash. However, you'll still be charged interest over this period and your loan term will be extended by the length of the holiday. In short, avoid if you can as payment holidays normally mean your overall costs ending up higher.

The interest charged on unsecured personal loans tends to be fixed for the loan term, meaning fixed monthly payments. If variable, you could be at the mercy of markets and the lender, making it harder to budget for repayments.

When looking for a deal you'll notice that lenders quote a 'typical' Annual Percentage Rate (APR). This is the rate that must apply to at least two thirds of applicants, so the rate you're quoted could be higher. The rate you end up with will largely depend on your credit rating. The better your credit score the more likely you'll get a decent rate (because the lender thinks it's unlikely you won't pay them back).

If you find yourself with enough spare cash to pay off the loan early, then it's probably a good idea provided your loan rate is higher than those for savings. However, your lender might charge you around one to two month's interest for doing so, factor this in to ensure early repayment is still worthwhile..

Although far less common than they used to be, a few lenders still charge arrangement fees. This is an upfront fee that you either pay initially or add to the loan. This should be reflected in the APR, but always check with the lender.

When comparing loan costs, always use the total amount repayable. While the APR is useful, lenders can manipulate it to an extent, so always better to compare the actual overall cost. How can lender's manipulate APR? One of the simplest ways is to give you a payment 'holiday', i.e. the lender won't start collecting payments for a few months. This increases the period of the loan, hence your overall cost (as interest is still being charged during the payment holiday) but perversely it can reduce APR.

Tuition fee loans cover up to the full amount you're charged for annual tuition fees, currently £3,375 a year. It's paid directly to the college or university.

Maintenance fee loans are intended to help towards accommodation and other living costs while you're studying. The maximum loan is currently £4,950 a year, rising to £6,928 in London. It's paid in three instalments at the start of each term.