Loans are an effective way of helping consumers spread out payments for larger purchases, such as a new kitchen or paying for a wedding. A personal loan can also help get finances back on track, through debt consolidation. It is important to understand that bank loans can vary - they can be secured or unsecured, and although rates quoted will be a typical rate offered to the majority of customers, they too can vary according to individual circumstances.
To help guide you through the loans maze, here is a brief guide to loans available in the UK:
- Secured loans - Secured loans are loans granted on the basis that you offer some security against the loan. One example of a secured loan includes a formal loan. For loans over the unsecured personal loan limit of £25,000, formal loans are offered that are secured against an asset you own such as your home, a life insurance policy or something similar. A bridging loan is also an example of a secured loan used to help in the purchase of a new home and can be either ‘closed’ or ‘open’. A closed bridging loan is used when there is a delay in moving homes once contracts have been exchanged; whereas an open bridging loan can help you to purchase your new property before you have sold your current home.
- Unsecured loans - Loans that are unsecured are also known as personal loans, and the maximum that can be granted as an unsecured personal loan is £25,000. Examples include a personal loan, which can be used for many purposes such as debt consolidation, buying a car or other major items, or for home improvements. The amount you will be able to borrow will usually be dependent upon your credit rating and affordability.
- Graduate loan - As its name suggests this loan is available to graduates, although some will differentiate according to the qualification achieved. The amount you can borrow and the length of repayment terms vary; upper limits of graduate loans can be as high as £25,000 although typically the maximum is around £10,000, with around five years to repay.
- Further education loan - A further education loan is available to graduates seeking finance to help them gain post-graduate professional qualifications. Applicants are typically required to be over 18 years-old and already hold a degree which applies to their chosen profession, although again terms may vary.
- Loan protection - Loan protection is an option that can be taken out with most types of loans. It will ensure that payments are continued on your behalf should you fall ill, have an accident or become unemployed.
- Loan Interest rates - Headline interest rates for loans are not necessarily the rate that will be offered to every applicant. That will depend upon the applicant’s personal circumstances and each lender will assess their suitability for credit, according to their own internal procedures.
Of course, the type of loan you choose will be based on your circumstances. It is also important that you take your time to consider the factors involved with taking out a specific loan, and this will include interest rates and loan repayment period. Whether it is a short or a long term loan that is required, you are sure to find one that suitably meets your needs.
Victoria Cochrane writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.