Personal Loans Guide

Personal loans (or unsecured loans) is a method of borrowing money from a bank or building society, which you can use for any legal purpose (even though most lenders stipulate that the loan should not be used for commercial purposes). You choose the amount you wish to borrow and the period of time you want to repay the loan over, and the rate will be set accordingly. You then make regular monthly repayments to pay back the full amount of capital plus interest.

As each repayment includes an element of both the capital and interest, you are assured to repay the loan at the end of the term, provided that you make all the payments on time.

Different loan types

Unsecured personal loans are usually available for between £1,000 and £25,000 over the terms of one to seven years. You are not required to put your house or other property up as security.

Secured loans work the same way, but are secured with your property, so you run the risk of having your home repossessed if you do not make the repayments.

Specific loan types, like home improvement loans and car loans, are just unsecured personal loans that go by another name.

How lenders make their money

Loan providers earn money in three ways:

  1. Interest – You are required to pay a rate of interest on the loan which represents the lender’s profit on the loan itself.
  2. Fees –set-up or arrangement fees are charged by some loans. If you want to repay the loan early, you may be charged an early repayment fee, and if you miss a payment, you can expect a missed payment fee to be charged.
  3. Associated products – other products may be offered by lenders, such as payment protection insurance generates an income for them.

What next?

How much do you need to borrow? Choose how much money you really need to borrow and the term of the loan. The primary rule is to borrow as little as possible and pay it off in the shortest amount of time.

Best Prepaid Credit Cards

What Is A Prepaid Card?

A prepaid card is a card issued by a financial institution, secured with funds that you pre-load onto the card. For that reason, it is sometimes referred to as a ‘secured credit card’.

With a prepaid card, you are not borrowing anything – you’ll load up the card with your own funds BEFORE you can spend – sort of like a gift card… or a pay-as-you-go phone -remember them?

The money you put on the card is what you’ll have available to spend.

Prepaid cards have a 16-digit card number, signature strip and company branding and can be used to make payments like debit and credit cards, but there are some very MAJOR differences:

  • It is not attached to a bank account
  • You’re not borrowing money
  • You must pre-load funds onto the card
  • You can’t go below £0
  • You don’t need to be credit-checked to get one


How Does It Work?

Quite simply. Once you’ve received your prepaid card, you can add your funds. There are numerous ways to top-up, but transferring money directly from your bank account to your prepaid card is probably the most common.

You can only spend the money you have loaded onto your card in advance.

Once you’ve topped-up, you’re ready to go. Most prepaid cards are Mastercard or Visa, so you can use them to make payments online or in-store, wherever these are accepted. You should also be able to use your card to make cash withdrawals at ATMs.

How Much Does It Cost?

When comparing prepaid cards, it’s important to consider the costs. These will vary from one card to the next. There can be several different costs associated with using a prepaid card. They can include:

  • Activation fees – an initial set-up charge for you to receive and activate your card
  • Monthly (or annual) fees – a regular fee to cover your provider’s customer service and administration costs
  • UK transaction fees – you could be charged every time you carry out a transaction with your card
  • ATM withdrawal fees – you may be charged for making ATM cash withdrawals at home and/or abroad
  • Load charges – charges when you load money onto your prepaid card
  • Dormancy fees – some companies charge you if your account is inactive for a certain period of time e.g. if you haven’t used your card for a few months
  • Redemption fees – if you’ve topped-up too much and want some of your unused funds back, you could be charged to retrieve your money
  • Foreign transaction fees – charges for using your card abroad or non-sterling transaction
  • Renewal fees – just like credit and debit cards, your prepaid card will have an expiry date: you could be charged for a new card when the old one expires.


Prepaid cards come with the option to either pay monthly or pay as you go. Generally, the fees will be lower with a pay monthly prepaid card. With a pay as you go card you might be hit with fees each time you transact. A pay monthly card is better suited to someone who uses their card regularly, whereas a pay as you go option may be better if the intention is to use the card only occasionally.

Things To Consider:

How You Will Use Your Prepaid Card

Knowing how you are likely to use a prepaid card will help you seek out the best deal to suit your needs. Think about things like how often you’ll use your card, what for (purchases, ATM withdrawals etc), whether you’ll be topping-up one lump sum or bit-by-bit, and where you’ll use your card – at home or abroad.

The Costs

Take the time to understand the different cards available and compare the fees and charges for making various transactions. If you’re going to be doing a lot of cash withdrawals, for example, there’s no point picking a card that’ll charge you every time.

Make Sure Your Prepaid Card Is From A Reputable Company

This can be a little trickier than choosing a debit or credit card provider, where you’re usually dealing with high street banks and big brands that you’re already familiar with. Do your research and be sure to make use of online review sites like Trustpilot.


One of the great things about prepaid card is almost anyone can get one! There are no credit checks… you don’t even need a bank account. Most providers just need to be able to verify your identity for you to be eligible.

Who Are Prepaid Cards Used For?

People with bad credit – if you’ve got a bad credit history, you might be unable to get a traditional debit or credit card. It’s easier to get a prepaid card because they don’t require credit checks. Some prepaid cards even offer a ‘credit-builder’ card so you can begin to improve your credit rating.

Ex-pats – you could get a prepaid card even if you’ve just moved to the UK and don’t meet the criteria for a debit or credit card.

Travellers – if you’re going abroad, you could use a prepaid card instead of cash. It’s safer than carrying a large amount of cash with you, which could be lost or stolen. It has the added advantage that you can top it up as you go, so no need to take all your holiday money out at once.

Teenagers – perhaps you want your kids to have financial freedom, but worry they’ll drain their bank account? A prepaid card is one way to limit their spending. They could also be used on days out or trips instead of cash. If the card is lost, it can easily be cancelled and you won’t lose the remaining card balance.

Elderly parents – when your loved ones are getting older, it can be a worry if they are carrying large amounts of cash with them. Cash can easily be misplaced or, sadly, make people vulnerable to thieves. Having a prepaid card allows financial independence, with the reassurance that the card can be stopped if it goes missing.

Big spenders – if you struggle to manage your spending, a prepaid card can be a good way to limit yourself as you can’t overspend or get into debt.

People on a tight budget – prepaid cards make it easier to stay within a budget as you can’t spend more than your available balance.

Employers – if you want to enable employees to make purchases, up to a set limit, you can control spending with a prepaid card.

How To Apply

You can apply for prepaid cards easily online via the providers’ websites. You’ll just need to fill in your personal details. If your application is successful, your account is usually opened immediately, and your card and PIN will be sent by post to you shortly after.


  • Easy to acquire – it’s easy to be approved for a prepaid card, regardless of your credit history.
  • Cushions against debt – you can’t go below £0. If you have trouble managing your spending or keeping out of your overdraft, a prepaid card could help as you can’t spend more money than you have loaded on your card.
  • Use online, in-store or at an ATM – you can use your card to pay in shops, online or over the phone, or to withdraw cash at certain ATMs.  
  • Keep track of your spending – since the advent of Contactless, and with the carrying of cash diminishing, how many of us are keeping track of our spending each time we hold our card up to the reader? A prepaid card enables you to set yourself a limit and you can view your transactions in real-time. You will only have access to the funds available at that moment – this can be a big advantage if your prone to making large impulse purchases.
  • Basic banking – you can use a prepaid card as an alternative to a traditional bank account. You could even have your wages paid direct to your card by your employer.
  • Security – a prepaid card if safer than carrying large amounts of cash which can be lost or stolen. If you lose your card, you can request a cancellation and keep your money safe until you get a replacement card.
  • Travel – Most cards are Visa or Mastercard, meaning you can use your card around the world. Avoid having to carry lots of holiday cash about with you. You can also use a prepaid card to manage your holiday spending money.
  • Learn money management – you can use a prepaid card to learn how to manage your finances… or teach a young person or student.



  • The fees – this is the biggest ‘catch’ with a prepaid card. You can incur a lot of fees just for using your card normally. Give careful consideration to the way you’ll be charged for using your card – shop around and choose a card with low fees.
  • Less consumer protection – A prepaid card doesn’t give you the same level of protection as a credit card. Regular credit cards have special legal provisions to safeguard consumers and retailers against damaged/faulty goods and purchases between certain amounts respectively. This is covered under Section 75 of the Consumer Credit Act of 1974. You may still have some protection under the Chargeback scheme.
  • No FSCS protection – because, unlike a debit card, it is not attached to a bank account, you have no protection under the Financial Services Compensation Scheme. Though your money should be safe if your card provider goes bust, if the bank they keep your money in becomes insolvent, your funds aren’t protected.
  • No interest – if you put your money in a bank account, you could earn interest. There is no interest on prepaid cards.
  • No overspend – sometimes you might need a little bit extra, but there’s no facility to borrow money with prepaid cards.



I have bad credit – can I get a prepaid card?

Yes. You can get a prepaid card even if you have bad credit or no credit history. There is no credit check to pass.

Can I borrow money with a prepaid card?

No. You’ll only be able to use the money you have pre-loaded onto the card.

How do I put money on a prepaid card?

It depends on your provider. You could:

  • Transfer money to your card from a bank account
  • Get your wages paid direct to your card
  • Top-up with cash at a Post Office or PayPoint location
  • Add funds from a credit or debit card