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How Do Any Purpose Loans Work?
Any purpose loans allow you to borrow money for a range of different purposes.
An any purpose loan is so called because it allows you to borrow money for pretty much any purpose.
The money you are leant is leant without any requirements or conditions of what you should or should not spend the money on - as long as it's legal of course!
Any purpose loans can be taken out through a loan brokerage or directly with a bank or building society.
When you take out an any purpose loan, especially for larger sums, you will be required to prove you can afford the loan amount and the monthly repayments.
After you have applied for an any purpose loan, the money will be transferred to your nominated bank or building society account, where you can then access the funds to use as you wish.
Once the money has been debited to your account, you will then be required to make the agreed monthly repayments for the duration of the loan term.
It is a legal requirement that lenders allow you to repay your loan early if you want to, however some lenders may charge an 'early settlement' fee, which is usually 1 months interest though it can be more for secured loans depending upon the lender.
What can I use an any purpose loan for?
Many lenders may ask for a general reason of why you want to borrow the money, however with most lenders this is not obligatory or binding.
The majority of people seeking an any purpose loan, and therefore the options of purpose displayed on application forms, include:
- Home improvements
- Debt consolidation
- Purchasing a car
- Financing a wedding
- Going on holiday
Some lenders may have certain conditions if you are taking out an any purpose loan for home improvements or debt consolidation.
If you are looking for an any purpose loan for home improvements, most lenders will require you to be a homeowner.
If you are looking for an any purpose loan for debt consolidation purposes, whilst most lenders allow this, you should check that the loan can be used for paying off existing debts.
What any purpose loan options are available?
The two main types of any purpose loans available are unsecured or secured loans.
Unsecured loans do not require you to be a homeowner and the money is leant based on your personal credit score and the affordability of the monthly repayments.
Because unsecured loan lenders do not receive any collateral on the money they are lending you they often require applicants to have a good credit history and an ample income.
Secured loans are available to homeowners only and the money you are leant is based upon the money available in your property.
Alongside the affordability of the monthly repayments, secured loans use what is called 'equity' to determine how much money you can borrow. Equity is the amount of money you already own tied up in your property. You can work out how much equity you have by taking the current market value of your property and then subtracting any outstanding mortgage or other loan secured on it.
Secured loans are often available to people who have a poor credit history. There are also many secured loan options available for people with little or no equity - allowing you to borrow up to 125% of your property's value.
How much money can I borrow with an any purpose loan?
Unsecured any purpose loans are generally available for amounts from £1,000 to £25,000 and can be repaid up to a maximum of 10 years - although most lenders have a maximum repayment term of 5 or 7 years.
Secured loans are often more suitable if you need to borrow a larger sum of money. They generally offer loans from £3,000 to £250,000 - although you will need to have the amount as equity in your property.
Secured loans can be much more affordable than unsecured loans, as the repayment terms can be as long as 25 or even 30 years, reducing the amount you have to repay each month.
How affordable is an any purpose loan?
The affordability of any loan is dependent upon the amount you want to borrow and how much you can personally afford to repay each month.
If you are looking for a large any purpose loan and you own a property, a secured loan can be much more affordable as repayments can be spread up to 25 or 30 years, reducing the amount you need to repay each month.
What if I have a poor credit history?
If you have a poor credit history you can still get an any purpose loan. Though it is important you know that you can comfortably afford to repay the loan so you do not get into any unmanageable debt.
Secured loans are more readily available to people with a poor credit history, though it's important to remember that if you fail to make a repayment your property is at risk.
If you are struggling to make a loan repayment, always get in touch with the loan lender and let them know - often they will be more willing to help you out than take away your home.
If you want to borrow money for purchasing a car or a very small loan there are specialist car loan lenders who will consider poor credit history applicants.
How do I find an any purpose loan?
As with any financial product, you should always compare at least 3 different products before applying.
Use our any purpose loan comparison page to see and compare the different any purpose loans available.
You can usually apply online for an any purpose loan and most lenders will get back to you quickly with a decision on your application.
Once you've been accepted for a loan, the application process is fairly simple and straightforward and you can usually get the finance you need within a few weeks.
Compare any purpose loans
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