How Can A Personal Loan Help You?

Sometimes, despite your best made plans, there can be times when you need to borrow money. You may need this quickly, perhaps your boiler has broken down, you need some car maintenance or you have had a burst pipe for example. Or you may need some extra cash to fund a something bigger: for help getting onto the property ladder, paying off existing debts or for home improvements for example. There are several different types of loans that you may be eligible for. I've put together a guide to help distinguish between those available. 

Personal Loans
Personal loans can sometimes be referred to as 'unsecured loans'. This is because you don't have to use anything to secure the loan eg, your house or car. Your personal loan will be offered based on what is in you personal credit report along with some personal details such as income. You will usually be able to borrow approximately £100 to £25,000 with an interest rate of between 3% and 30%. A personal loan can be a steady way of borrowing, you will know how much you will be paying back each month as you will have an agreement with the lender. This can be different if you have a variable interest loan. 

Secured loans
This is when you borrow money which will be secured against something that you own, usually property. This means that if you do not pay back the loan the lender has the right to take the asset you have as security. You will need to have sufficient equity in your property. You can usually borrow higher amounts with this type of loan with an interest rate of approximately 4 to 10%. 

Payday Loans
Payday loans are short term loans, designed to be paid back within 28 days. There is usually a fee to be paid rather than an interest rate. If you miss a payment or cannot repay, you'll be charged more which can make this an expensive option. 

Short Term loans
These loans are taken over a short period of time and are paid back in installments. The interest will be spread evenly across the repayment term. They usually have a high APR. 

Bad Credit Loans
If you have bad credit or no credit history at all, it can be difficult to get a loan. You may however get a 'bad credit loan' These sometimes need some security against the loan and you may also have to pay a higher interest rate.

Guarantor Loans
A guarantor loan is where another individual shares some of the responsibility of the loan repayments if you can not pay back. This will usually be a family member such as a parent. There will be higher interest rates on these loans. 

Property Loans 
When you are buying a home, unless you have the cash payment, you will need some quick property finance. A mortgage is a loan that is used to by a property. It is different from a usual loan in that it is usually over a longer term, ie 25 years, although this can be up to around 40 years. It is secured against the property that you have bought, so if you are not able to repay the loan, the lender is able to take away your property. You will usually have to pay a proportion of the cost of the property yourself (the deposit). 

Things to consider before taking out a loan...
It is important to ensure that you are able to make the repayments of the loan. You can sometimes take out payment protection insurance (PPI) incase you lose your job or are unwell for example. Always compare loans to find the best deal for you and do ensure that you read the small print of the loan too. It is also advisable to look at the early repayment fee for if you are later in a position to pay the loan off in full. 

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