Do you have at least one payment unpaid from your monthly bills? You are not alone. Rising everyday expenses are stretching and affecting the budgets more than ever before. With inflationary pressures still biting into savings, households struggle to manage debts.
According to the recent data, UK households have an average debt of £5,703 in personal loans. It shows how common small financial facilities have become to counter essentials.
Moreover, half of Brits have already spent their December wages. At the same time, 66% individuals face a delay in getting their January pay. It shows the need for external financial support to counter basic needs. The blog discusses how personal loans may prove helpful in covering sustenance costs.
Table of Contents
- What are personal loans for living costs?
- Who Might Need Personal Loans for Living Costs?
- How Personal Loans for Living Costs Work in the UK?
- Key Considerations Before Borrowing for Living Costs
- Alternative UK Loan Options for Alleviating Living Cost Pressures
- Bottom line
What are personal loans for living costs?
Personal loans for living costs in the UK are an unsecured financial facility that helps one pay for rent, utility bills and groceries. The loan comes with the flexibility to repay in fixed monthly instalments.
One must pass the affordability and credit assessments to qualify for the loan. The interest rates remain competitive as the loan terms and amounts remain low on these loans. You may get up to £500-£5000 for your needs with a 60-month repayment tenure on a personal loan. It is ideal to use these loans only if the savings do not suffice to pay the priority bills.
Who Might Need Personal Loans for Living Costs?
Anyone who struggles to meet basic living necessities like rent, groceries and utility bills may consider Personal loans for living costs in the UK. These individuals are mostly the ones facing financial vulnerabilities or have low income. Here are those who may benefit from a personal loan for living expenses:
- One with no savings
- One living from paycheck to paycheck
- Renters with high monthly expenses
- Self-employed or part-time earners
- Single parents struggling to meet their children’s needs
- Women with low income and other liabilities
How Personal Loans for Living Costs Work in the UK?
A personal loan is a flexible way to borrow money. You get the freedom to choose the loan amount and the repayment term. However, you only get the amount that you can afford to repay comfortably. Here is how a personal loan works in the UK:
- Step 1: Calculate the amount required
- Step 2: Compare APR and terms
- Step 3: Apply online
- Step 4: Get an instant quote (no obligation)
- Step 5: Provide documents
- Step 6: Get the cash in the bank account
- Step 7: Pay the dues in instalments
Calculate the amount requirements:
Before seeking loans for everyday expenses in the UK, identify how much you need. Check your income and monthly bills. Borrow only what you need and can repay on time. You can use a loan calculator to determine the right amount to borrow.
- Compare APR and terms
Identify how much you can get given your personal finances. Compare APR, interest rates and total repayable amount by pre-qualifying. The interest rates you get depend on the amount, credit score and loan term.
| Credit Score Band | Typical APR Range (UK Personal Loans) |
|---|---|
| Excellent Credit | ~5% – 9% APR |
| Good Credit | ~9% – 15% APR |
| Fair Credit | ~16% – 25% APR |
| Poor Credit | ~29%+ APR |
After choosing the one offering the lowest APR and interest, apply online. Mention details like name, email, contact, purpose, and bank account (if asked).
- Get an instant quote
You may get a quote soon after you apply for household bill loans in the UK. It lists the basic sum, the monthly instalment sum and the total repayment amount. It is not an exact but an approximate amount that you may get, given the financial situation.
- Provide documents
You must be ready with a few documents to get a loan. These are:
- Personal ID proof- driving license/ Passport/
- Bank account information and proof
- Bank statements of the last 6 months
- Income slips/pension/part-time/rental
- Proof of residential address
After applying with documents, you must provide consent to the final agreement that you receive. Analyse and choose the repayment structure according to your finances.
- Get the cash in the bank account
Once you provide the documents, the loan provider verifies and analyses your affordability against them. Accordingly, they release the amount that you can comfortably afford.
- Repay the dues
Lastly, set direct debits to pay the dues timely according to the loan agreement. Start budgeting for the payments once you get approval.
Key Considerations Before Borrowing for Living Costs
You must consider a few aspects before tapping into monthly living cost financing options in the UK.
Temporary Vs. Budget issues
Identify whether the cash problem you face is temporary or a budget issue. If you have been increasingly depending on small personal loans in the UK for every need, it could be a budget issue. Thus, try to re-analyse finances and fix the budget. Identify certain aspects; if behind on bills. It could be cutting unnecessary expenses or increasing income.
- Prioritise debts
Begin with the most expensive and troublesome debt that you struggle to pay. It may seem like this:
rent>mortgage > energy > council tax > food
Identifying the most important payments depends on the seriousness of the situation. For example, not paying rent may lead to eviction. However, not paying for food may not affect much.
You can consider tenant loans if personal loans do not meet your needs. It may help you cover a specific purpose, like paying rent.
- Choose repayment terms wisely
Picking a longer term may lead to paying more interest on the loan. Alternatively, shorter term means costly monthly instalments. Therefore, if you want to pay less monthly, choose a longer term and vice versa. If you need to know more about how to choose a repayment structure, check this out at Money.co.uk.
- Repay the dues continuously
Avoid missing any payments on the loan. It helps you avoid missed payment penalties. You can set direct debits to pay consistently.
Alternative UK Loan Options for Alleviating Living Cost Pressures
Apart from personal loans, there are other options that you can check to meet your needs. It is especially when it does not meet your goals.
- Bad credit loans
Individuals with credit issues like CCJ, bankruptcy, and missed payments may consider bad credit loans. It helps one qualify more quickly than traditional loans. The interest, however, stays competitive on these loans. However, bad credit loans in the UK may prove helpful in building a credit score alongside meeting goals.
- No guarantor loans
If you need a loan without involving a third party in the agreement, a no-guarantor loan may help. It helps you qualify for a specific loan amount without involving someone else. It grants you the authority to manage the loan payments individually. One must have a consistent income with a fair credit score to get no guarantor loans.
Alternatively, if you have just started building a credit history or started your university course, you can seek alternative ways. Check aspects like guarantor loans, which may help you get instant approval. You can apply with a guardian or someone known to meet basic needs.
- Loans for people on benefits
Individuals with basic pay or sustaining on benefits payments may consider loans for people on benefits in the UK. It may help you meet basic needs like rent, utility bills and groceries. The amount you get here is less than that of personal loans.
Bottom line
Although personal loans may help you cover the bills, compare the costs. Check your savings first to meet the requirements. You can also consider basic money-saving aspects like cutting non-essentials. Prioritise essential bills to pay and set direct debits. Ensure that the loan payment fits within your budget well. It should not affect your necessities.
When someone writes about UK finance, both research and experience should be visible. Ken Stokes is a prime example of this. He is a well-experienced finance writer and author and possesses years of experience. He is currently responsible for the position of Senior Loan Executive at 24loanswales. He joined the organisation 6 months ago, but he already has enough experience to guide someone on any loan product.Ken Stokes is a PhD holder in the Business Finance stream. Therefore, he has extensive knowledge of the UK finance sector.
Being part of 24loanswales, he has already written research-based blogs for the company’s website. Start reading his blogs here before applying for any loan.
