Types of loans
At some point in their life, most people want access to extra money that they can pay back later. Here's the types of loan that are available.
Secured loans
A secured loan gives the lender the security of knowing that if you fall behind on repayments they can claim the money back by repossessing an asset that you have secured the loan against. The most common way of securing a loan is to take out a mortgage on your property.
How much can I borrow? Up to 125% of the value of the assets you are securing the loan against.
Interest rate: This is often cheaper because the lender is not worried if you can't make repayments.
Pay back time: Up to 25 years depending on the assets.
Problems: You could lose your home.
Unsecured personal loans
This is just a bank loan, it isn't secured to any of your possessions. It is good if you need to pay for a large item such as a car or a holiday.
How much can I borrow? This really depends on your circumstances, but the maximum is about £25,000.
Interest rate: Variable depending on how much you borrow and over what period of time you agree to pay back the loan.
Pay back time: 12 - 96 months. The longer your repayment time, the more interest you pay because you have the loan for longer. Some banks offer you the chance to combine all your financial commitments into one loan with a fixed interest rate so that you can pay your debts off gradually by making one payment each month.
Problems: If you can't make repayments the bank can blacklist you, which could make it hard for you to get credit in the future;
Student loans
As a university student you are able to get low interest loans to help you get by while you are studying. These loans are partly means tested, and eventually have to be repaid in full. The loans are run by the Student Loans Company, but you start by contacting your Local Education Authority.
Career development loans
This is simply a deferred repayment bank loan to help you develop your career through education and/or training. You can borrow anything between £300 and £8,000 to help you fund up to two years of learning plus (if relevant) up to one year's practical work experience where it forms part of the course.
Car loans
Car loans tend to be deferred repayment bank loans that allow you to buy your car with affordable monthly payments. These unsecured loans usually allow you to defer payment on up to 60% of the loan value, meaning you can borrow up to £20,000 for four years.
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