Loan Basics
A brief introduction to the different kinds of personal loans available
Unsecured Loans
These are the most basic kind of personal loan, like the ones usually offered by high street banks. They are open to people of all residential statuses - tenants, homeowners, people living with their parents, etc.
'Unsecured' means that you are not offering any assets as security (i.e. collateral, or a guarantee that the loan will be repaid), and so are usually only available to people with fair or good credit ratings.
They are, however, quick and easy to arrange providing you pass the credit score - some loans even have the option of a cheque in 24 hours delivered by courier.
For - Quick to arrange, low rates
Against - Usually need a good credit rating
See Also: Unsecured Loans Listings, Compare Unsecured Loan Rates
Secured Loans
Only available to homeowners / mortgagepayers, these are loans which are 'secured' against your home. This means that if you fail to keep up with your repayments the lender has the option of selling your house to cover the debt.
In practice, it is rare for matters to get to that stage, but as the option exists lenders are more willing to approve people with poorer credit ratings.
In fact, it is common for secured loans to be approved for people with all sorts of previous credit problems up to and including County Court Judgements or bankruptcy, so long as they own their home and have sufficient equity available to cover the loan amount.
Interest rates for secured loans are often higher than on unsecured loans, and depend to a great extent on your credit rating, how much you want to borrow, and how much your home is worth.
For - Easier to get approved, bad credit not usually a problem, larger loan amounts available
Against - Your home is at risk if you don't keep up repayments, can take longer to arrange, usually more expensive than unsecured loans
See Also: Secured Loans Listings
Payday Loans
Payday Loans are a relative newcomer to the UK, at least online.
They involve a small cash loan of usually £100-£500 or so, which you borrow for a very short time to see you through until your next pay day.
They are useful if you can't make ends meet because of an unexpected bill, for example, but the danger is that they become a 'habit' and you need to take one out every month to stay afloat. The lenders make this very easy, with options to 'extend' your loan widely available.
They are also very, very expensive compared to other forms of credit, but may be worth considering as a last resort when you need funds fast.
It is very easy to get approved for a payday loan, as usually anyone who is employed and has a bank account and debit card will be accepted.
For - Very quick to get the cash, very easy approval
Against - Very expensive, and can become a 'habit'
See Also: Pay day Loans Listings
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