Most lenders use a simple calculator to work out how long it will take you to pay back the full amount in installments, and your resulting APR (annual percentage rate). This is usually one of the first things you will need to do once you have decided to borrow money from an official lender.

If you’re considering borrowing money, you will need to decide whether to opt for a secured or an unsecured loan. Although the mention of anything “unsecured” makes many people uneasy when it comes to finances, this method of borrowing is actually the better choice for most people.

What’s more, if you don’t own your home (i.e. you rent your home) unsecured borrowing is the only option you will have, as the property is not yours to secure any borrowing against. While secure loans can be paid off over long periods (several decades such as, like a mortgage) unsecured is the best option when it comes to smaller amounts.

Personal loans usually range between £500 and £25, 000. Eligibility will usually depend on your credit rating, however, if you know there are blemishes on your credit record, there are lending companies out there who will consider your application on personal circumstances alone without running a credit check.

In this instance, lending companies will usually ask for proof of your monthly income to make sure you can afford your repayments. They may ask for bank statements, pay slips, or to speak to your employer directly to find out that you work there and receive the salary you have declared.

If you know your lender will check your credit record, it’s important to know where you stand with the credit bureau. The best way to do this is by using a free website like Clear Score. You will be asked to enter your personal details and answer some security questions, but then you will have access to your credit file at any time.

It’s useful to be aware of your score, particularly if you’re planning on applying for a mortgage or buying a business in the future. However, it’s not the be all and end all – there are lending companies out there who will consider your application without running a credit check. Look out for “poor credit” lenders.

When using a loan calculator – whether online or through your bank or lender in person – you will be asked how much you would like to borrow. It’s a good idea to spend some time figuring this out. Don’t be tempted to borrow a large amount that you won’t be able to pay back. The calculator will help you stay within your means.

You may be asked to state the purpose of your borrowing. This could be anything from moving house, paying for a wedding or consolidation. It’s important to be clear about what you intend to use the money for, as this will tell your lender’s decision – although of course no one will be checking up on you once the money is in your account!

The calculator will work out what your monthly repayments will be, depending on how much you wish to borrow and over what time. Personal loans can take anywhere between six months to six years to pay back – depending on how much you can afford to pay per month.