Borrowing Money: Understanding How Personal Loans Work

Finance and the finance system is one of the most complex and difficult things to understand in our society, but it is also one of the most important. Money is one of the most important things in our society as it determines so much about our lives and people work 40+ hours a week to make sure that they have enough money. It determines what our quality of life is like, if people have a lot of money, they tend to have less stress and their quality of life is higher as they can afford luxuries such as holidays, clothes, and cars. If people don’t have much money they tend to be more stressed as not only can they not afford the luxuries that help to improve quality of life, but often they can’t even afford basic necessities like their rent, food, and heating. As money is so important, this makes anything to do with finance important, but often people struggle to understand the finance system as many people aren’t good with numbers. The finance system covers everything from how national banks work and how they operate to control things such as the inflation rate, to how to make the best investments to diversify your investment portfolio to how loans and borrowing money works. If you’re in a position where you need to borrow money, whether this is to invest it to make more money or it’s to make ends meet, we’ve found all the information you’ll need to understand how personal loans work.

What is a loan?

A loan in some circumstances is very useful, it is a commitment between two parties, usually a company/individual and a bank or loan company. In this agreement one party will lend the other party an agreed amount of money, A loan is beneficial to both parties as the company or individual may have no other way to acquire capital so this is helpful to them and, loans are paid back with an interest rate which benefits the lender as they’re making money.

How interest rates work

Interest rates are always changing and they’re really important as if you have a high-interest rate on your loan it can become difficult for you to pay it back. An interest rate is attached to the loan and is written clearly in any loan agreement that both party’s sign. There is a simple interest which means each monthly repayment will be the same as it will be a percentage of the whole loan or compound interest which means it will be a certain percentage of how much is still owed of the loan. Interest rates are determined by many different factors and some loan agreements state that the interest rate is subject to change over the length of the loan agreement.

Different loan types

There are many different types of loans available out there for people or businesses to borrow. A personal loan is one type of loan and in its simplest terms is a payday loan that is guaranteed. These loans on average are paid back over 12 months but can be paid back for as long as 84 months in some cases. Some other types of loans include credit card loans, which act as an overdraft, student loans which can only be used to pay college fees, car loans which are used if you’re wanting to buy a car on finance and small business loans which are an incentive to help small companies as it is difficult to start up a small company.

What is loan collateral?

Loan collateral is something that is used to protect the lender when 2 parties agree to a loan agreement. As there is no guarantee that the borrower will ever pay back the money, the lender can take assets such as houses or cars as loan collateral as both an incentive for the borrower to pay the money back and as protection for if they don’t. If the loan is not paid back, the investor can seize the asset is as a way to get back some of their lost money.

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All the Reasons you Should Get your CFA Charter in 2021

For those of you that are not already aware of what a CFA charter is, it is basically a very well-developed qualification that is one of the hardest that a business and finance graduate can get. Although this qualification may be one of the hardest out there, it is definitely worth it if you are able to get it and achieve a high grade within the examinations. For somebody who is unsure of what they want to do after they graduate this qualification would be a good option as it is something that is best worked on when you have no other big responsibilities in your life as the research and preparation process for the exams will take up a lot of your time. 


There are many reasons in favor of your getting this qualification however, I would highly recommend that you do plenty of research into what you will have to do to achieve this as it is one of the exams with the biggest worldwide failure rate ever. With this in mind, there is plenty for you to consider and I would recommend that you take a realistic approach when thinking about taking your CFA charter.  



One of the biggest reasons that you should consider getting your CFA charter would be the experience that it provides, with so many people doing badly on the exam and its recognisability as being one of the most difficult qualifications you can get, the experience that is provided by even attempting to get this qualification is going to be something that you cannot get anywhere else. Even if you are not as successful with it as you once thought you would be, the fact that you are putting in the effort to revise and attempt the assessment will provide you with a  lot of unique experience that many others in the industry do not have. 


Having this experience is all going to help you with putting together a solid CV with plenty of different things to talk about in any potential job interviews you have coming up. With any attempts at this qualification, you are not only showing that you are skilled enough to attempt such a big exam but also that you care enough about your progression in finance and business to give it a go, which is both great qualities when looking for employment.  



As mentioned previously this qualification is not easy to get, you will need to ensure that you have saved yourself plenty of time to go over everything that you have learned during your previous studies, as well as ensuring that you purchase the relevant study guides and stick to a hardcore revision schedule up until the date of your cfa level 1 mock exam, even the mock exam will require you to do a lot of preliminary research and it is a great thing to do to establish where you are at with your studies and looking for any areas that need improvements.  


Sticking to a large research and revision schedule is very important for you to do well on the exam, but even if you do not do well you will still be extremely well versed in finance and business management based upon the work you have done. This is why it is so beneficial to even give the CFA charter a go as the work you put in towards the qualification is going to be very useful later in life and help make you stand out when employers are comparing your CV with other graduates.  



Another reason why you should definitely look at getting your CFA charter this year would be because it is so recognizable within the industry, when you finish your official studies and graduate it can be hard to know what to do. Taking the time to revise and complete your CFA charter is something that you can do which will further your career as well as making sure that you are not wasting your time by doing things that are not as beneficial for you. If you have on your CV that you have even attempted the charter it shows that you care about going further and getting extra qualifications within the industry.  

The business and finance world is one that is filled with hopeful graduates every year, as the course is so popular this means that there is a lot of competition against you in terms of finding work in the sector that you want to work within. Having such big qualifications like this will make you stand out completely from the crowd and for those of you that are unsure about the employment after education process, having another few months to figure things out could be just what you need.  



If you are able to secure your CFA charter it is likely that you are a very advanced candidate for higher-paying work within the industry, the fact that you are able to complete and achieve a good grade within this exam shows that you have the potential for positions like manager within a finance company. It is no small feat to complete this charter with a good grade so don’t downplay your success by going for a lower-ranking position. Employers will appreciate your authority and skill and it is likely that you will get the job you desire.  

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