When we bought our house we had grand plans to extend. The side and back of the house are absolutely perfect for a wrap a round extension and we had visions of the most wonderful open plan kitchen / diner / family room overlooking the garden.

Two years down the line, lots of blood, sweat (mostly my partners) and tears (mostly mine!) and we have made a dent in the renovation work. Only small hitch is we will most definitely have spent up by the time we are complete. And yet still we have dreams of cooking in our open plan kitchen while the children happily play in between the house and the garden.

Looking into the options for financing such a project seems rather daunting and is not something either of us have undertaken before. Chill Money got in touch with me to see if I wanted to feature a blog post on ‘How personal loans work’ and I thought, although not necessarily interior related it could be a valuable resource for people like me who have a project in mind that they need finance for. So whether you are looking to extend your homes or just take on some home improvements, today’s guest post is for you!

If you’re in need of some extra cash, you could consider taking out a personal loan. However, before you sign up, it pays to know how these financial agreements work. In this blog, we take a look at the basics and what you need to know to suss out if a personal loan is the best option for you.

What is a personal loan?

A personal loan allows you to borrow a certain amount of money from a lender with an agreement to pay it back over a set amount of time. It is often referred to as an ‘unsecured’ loan, meaning you don’t need to secure it against any asset, such as your property. This type of loan could offer an effective way to help you pay for a number of different things, whether it’s your dream wedding, a new car or a trip abroad. It’s important to remember that regardless of how much you borrow, you will pay interest too.

How do I apply?

You can apply for a loan by visiting a lender in person. For instance, you could book an appointment at your local bank and speak to a specialist face-to-face. However, if you’re in a hurry to receive your funds or you just don’t have time to sort out your finances in person, it’s also possible to apply online. In most cases, you will need to fill in an application form, providing a few personal details. From here, your application is processed, with some lenders doing this the very same day. What’s more, certain companies, such as Chill Money can approve and deposit the funds into your bank account the next working day.

How much can I borrow?

When you initially apply for a loan, it’s usually up to you to request the amount you wish to borrow, however it’s then at the lender’s discretion to agree to this sum. It’s likely your application will be assessed on an individual basis and a number of checks will be carried out, including a credit check. The lender will look at your current financial situation and decide whether you are eligible to borrow the amount you’ve requested based on your financial status and repayment capacity.

When do I have to pay the money back?

Like with the amount you can borrow, the time period over which you pay the funds back is up to you. Again, this can vary between lenders, but you can usually select a repayment term of anywhere between 12 months and five years. Bear in mind though, the longer your repayment plan is, the more interest you will have to pay on top of your loan amount.

By understanding the basics of how personal loans work, you should be able to suss out whether this form of financial help is right for you.

A collaborative post with Chill.