Different Types of Loans and How to Choose the Right One

There are many different types of loans you can get, so it is important to choose one that will match your needs exactly. In this article you will learn about some of the different options you have so you can make the right decision. The more research you do into these options, the better your chances will be of selecting the best one overall. You don’t want to apply for a loan until you have done your homework.

Secured Loans

A secured loan is named as such because it requires you to forfeit some sort of property as collateral in case you cannot pay it back. This is typically a house or car. Mortgages and car loans are two prime examples. If you fail to pay back your mortgage, your home will be seized by the bank/lender. There are many lenders that accept numerous types of property as collateral, including stocks, vehicles and other things of equal or greater value to the loan amount. These loans are considered high-risk, because you have a lot to lose if you cannot pay back the money you owe on time.

Unsecured Loans

Unsecured or personal loans are one of the most common borrowing options in existence today. They do not require any collateral to get, which is one of the reasons they are so popular. There are many different lenders that give out personal loans in varying amounts. This includes private lenders, which we cover below.

One of the drawbacks of unsecured loans is that they can be difficult to get if you do not have good credit. This is not always the case though, as it largely depends on the lender. A personal loan can be used for many different things, though a lot of banks limit your usage. If you are planning to get an unsecured loan through a traditional financial institution, they’ll most likely ask what you want the money for. If they don’t like your answer, your application could be rejected.

Payday Loans

Payday loans or short-term loans are a kind of personal loan that is typically given out by private lenders. These loans are usually for smaller amounts ranging from £200 to around £2,500. One of the best things about these loans is that you can use them for whatever you want, no questions asked.

You will discover that some lenders give out larger sums than others, but it largely depends on your own personal income. You need to submit proof of income when applying for this type of loan.

Another huge benefit of payday loans is that you don’t need excellent credit to be approved. In fact, you can have a pretty low score and still be okay. Some of these lenders will take a look at your credit, but this doesn’t mean they absolutely require a high score.

A payday loan is a good option if you need cash fast and/or have trouble getting a bank loan because of bad credit. There are many great things about this borrowing option, including the lax standards for approval. Almost anyone can get a payday loan, but you must be a legal UK citizen, over the age of 18 and have an active bank or credit union account.

While some people are hesitant to get payday loans, there are numerous governmental regulations in place for them. This means that your chances of getting scammed or ripped off are actually quite low.

Credit Union Loans

Some people go to credit unions when they need a loan, which can be a good idea. Credit unions are known for offering slightly lower interest rates than banks, but this isn’t always the case. You will need to be a member of the credit union to get a loan, so keep that in mind. It usually doesn’t cost anything to join a credit union, though some do charge annual fees.

Peer-to-Peer Loans

There are numerous peer-to-peer lending websites that match borrowers with lenders. This is a very easy way to get the loan you need, but it is not right for everyone. You need to remember that these loans are not backed by the government’s Financial Services Compensation Scheme, so it is somewhat of a risk. This is still something that you should consider looking into. Since there are so many of these sites, it is important to do your research so you can select the right one.

If you are currently in need of money for any reason, it is definitely a good idea to look into all of these options before making a decision. Keep in mind that payday loans are the most versatile borrowing option available, as they are easy to get and you can use them for anything you want.