A personal loan is aimed at meeting short-term and long-term expenses. The minimum amount you can borrow with a personal loan is £1,000, and the maximum is up to £50,000. However, you will have to prove your repaying capacity. Borrowing a small amount of money is not so difficult because the lending decision is made based on your repaying capacity only. 

If the loan amount is £500 or less, they do not even run hard credit checks. They are not reported to the credit bureau, so they cannot pull your credit report. But when you borrow a large amount of money, an affordability check is run. It includes a perusal of your credit report. As a result of hard inquiries, you will lose your credit points. If you are looking for a £50,000 personal loan, you should know some facts about them.  


Personal loans are expensive 

Believe it or not, personal loans are exorbitant. Even if you apply for these loans with a good credit history, you will end up with very high interest rates. Lenders charge high interest rates because the default risk is too high. In case you make a default, your lender cannot recover their money by selling your personal assets.  

On the contrary, secured loans are way cheaper than personal loans because they are subject to collateral. If you fail to discharge your debt on time, your lender may liquidate your collateral to get their money back.  

Tips: 

  • Whether you are using a small personal loan or a large one, you must compare interest rates to ensure that the deal offered is not expensive.  
  • Focus on the repayment length as well. If you choose a longer repayment plan, you will end up paying more interest in total. 
  • Do not borrow more than you need because there is no point in paying interest on money you did not need at all. 
  • Evaluate your affordability. Your financial circumstances can unexpectedly change, and this will make it challenging to keep up with large personal loans.  
  • Have a backup plan in case you lose your job or face difficulty repaying your debt. 


Large personal loans can improve or destroy your credit rating 

When you take out a £1,000 loan for bad credit from a direct lender, this cannot improve your credit rating. This is because small personal loans are paid off in a lump sum. They cannot give clarity about your repaying capacity despite fluctuation in your income.  

However, when you borrow a large amount of money, you will have to pay down the debt over an extended period of time. Since you will be paying down the debt in fixed instalments, your on-time payments will help improve your credit score. This is because lenders would be able to see that you stick to your obligation. 

However, it is crucial to note that if you fail to clear your dues, you will end up losing your credit points even if the size of a personal loan is small. 


Things to do before taking out a £50,000 personal loan 

It is worth bearing in mind that taking out a £50,000 personal loan is not a cinch. In fact, when you have to take out a personal loan worth £10,000, it is not so easy. There are loads of formalities that you need to fulfil.  

You know that a lender will run an affordability check before approving your loan application. Not only will your credit score be checked, but your income sources will also be thoroughly checked.  

But that is not enough to decide whether you should take out such a large personal loan. While direct lenders are responsible for running an affordability check, you should also carefully check your repaying capacity.  

Assess your financial situation 

You should carefully determine whether your budget allows you to repay your debt. A £50,000 personal loan is quite a large personal loan that you are to repay over a period of years. You might be certain about your repaying capacity at the moment because you have a secured job, but what if you lose your job in the years to come? Do you have an alternative repayment plan? 

Keep your credit score in good condition 

There are some personal loans that come with a no credit check facility. Personal loans with no credit check cannot be larger than £500. However, when you are taking out a £50,000 personal loan, your credit score cannot be ignored. A lender must require you to have decent credit to qualify for these loans. 

  • A decent credit score will help you qualify for a personal loan at lower interest rates. 

In order to ameliorate your credit score: 

  • You should pay off all your existing bills. Rent is also an obligation. Avoid running rent on arrears. 
  • You should minimise your credit utilisation ratio. Make sure that you have not exhausted more than 30% of the total credit card limit. 
  • While a debt-to-income ratio does not affect your credit score, it influences lenders’ approval decisions. You should keep it up to 25%.  
  • Avoid putting in multiple loan requests to avoid hard inquiries. They can quickly plunge your credit score.  

While it is essential to have a decent credit score, you should also have a strong repaying capacity to prove that you will not miss payments.  

Research lenders 

A £50,000 personal loan is not a small amount of money. The cost could be high because of high interest rates. It is enjoined that you carefully compare interest rates in order to avail yourself of the best deal.  


The bottom line 

It is not easy to get approval for a £50,000 personal loan. You must have a decent credit score and strong repaying capacity. Compare interest rates, so you do not end up with an expensive deal.  

Personal loans are quite expensive. You should always take them out only when you are in need for money. Never borrow more than you can afford. Use an online calculator to get an idea of your repaying capacity.