With banks and independent companies offering all kinds of financial deals, finding the right loan for your needs and budget can be a minefield. Picking the right type of loan is important and could make your repayments cheaper and easier to manage.
To help you make sense of what loan is right for you we’ve put together this breakdown of all the loans available to you in the UK.
Secured vs Unsecured Loans
All loans fall broadly into two camps:
Secured and unsecured.
Secured loans are loans which have an asset like a car or home attached to them. If someone is unable to repay the loan, the loan provider can repossess the asset and sell it to recoup the outstanding loan.
Unsecured loans don’t require an asset attached to the loan agreement. Instead, you borrow a sum of money and pay it back in instalments over a set period.
This simple difference separates secured and unsecured loans but is important to understand before agreeing to any type of loan.
Secured loans are usually related to large loans like mortgages and come with restrictions on what the money can be used for. Secured loans can range in value and go up to millions of pounds. These include homeowner loans, bridging loans, vehicle finance and some debt consolidation loans.
Home loans are sums of money borrowed secured against your property. As such they are only available to people with equity in a home. These loans are offered by a wide range of companies and usually require in-depth credit history and application. The loan amount will also be determined by the value of your property, your financial situation and your credit history.
These loans are typically taken out to buy a property or upgrade or repair a property. People usually borrow larger sums (from £10,000 +) and are usually paid back in fixed instalments over 5+ years.
However, it’s important to remember that every loan is different and will have unique amounts, timeframes and repayment plans.
A bridging loan provides funds to buy a property while you wait for your property to be sold. Bridging loans are often used when the timings of house chains don’t match up. To calculate what loan you can get banks will add the value of your new home to your existing mortgage and subtract the likely sales price of your old home.
Bridging loans are suitable for borrowing large sums in a short space of time but watch out, they usually come with high-interest rates and high fees. Interest is compounded over the time it takes to sell your old home. Once that has been finalised you simply pay off the accrued debt on your new mortgage through regular mortgage payments.
Car finance comes in a range of options including hire purchase, personal loans, and personal contract purchases. Car loans are taken out for the specific purpose of buying a car. These loans can spread out the cost of a car over monthly repayments.
To qualify for a car loan you usually have to be over 18 years of age and undergo a credit check. Each loan provider is different and it’s worth researching their requirements before applying for a loan. It’s also worth remembering to apply for loans from lenders who are more likely to say yes. Too many rejected loan applications can negatively your credit report and make applying for a loan even trickier.
Most car loans (like hire purchase) require a deposit. It’s worth remembering that the larger your deposit, the lower your loan amount and the less interest you’ll end up paying.
Unsecured loans are usually considerably smaller than secured loans. The loan amounts are usually capped (roughly from £500-£25,000) and the time frame for repayment much shorter (1-7 years). Interest rates will also vary according to the lender. These loans come in all shapes and sizes. Here are a few of the main loans available.
Personal loans can be used for a wide range of needs. The loan is unsecured and not usually tied to a specific purpose. Interest rates will vary and you will be subject to credit checks as well as other financial checks. Your credit rating is very important when applying for loans as a poor credit rating could result in higher interest rates and potential refusal.
With a personal loan, you borrow a fixed amount over a fixed term and usually pay a fixed amount of interest. You repay this loan making set monthly repayments.
When comparing personal loans, be sure to compare several options and choose the best one for you. Look at the charges and make an informed decision.
Bad Credit Loans
For people with bad credit ratings, there are bad credit loans. These loans usually have much higher interest rates. However, if you need the funds, a specialised bad credit loan may be the best option. Bad credit loans are available in various types namely;
- Guarantor loans (where someone commits to paying off the loan for you if you default)
- Peer to Peer loans (when you borrow from a person instead of a bank/company)
Be sure to review the fees before committing to a deal.
Short Term Loans
Short term loans plug the gaps when a rainy day comes. MOT repairs, new appliances, whatever you need cash for quickly. QuidMarket offer between £300 and £1,500 as a short term loan to help cover these costs. Our Short term loans also allow you to choose the repayment time from between three and six months. You can even pay your short term instalment loan weekly or monthly depending on how often you get paid.
Short term loans are an expensive form of credit and are not designed for long-term borrowing meaning there may be cheaper options available. Please only apply for the amount you need and take note of the monthly repayments to ensure they are affordable.
Applying for a short term loan is based on the information held in your credit report, along with some personal details in your application (such as your income, which doesn’t appear on your credit report).
QuidMarket has been helping people since 2011. Our quick and easy application process is manually underwritten by our team and we are committed to providing a service that surpasses our competitors. We are a direct lender and charge no broker fees. We also don’t charge any late payment fees. Our application page is fully transparent and shows you exactly how much you will repay each month on your loan. There are no hidden costs or charges.
Whatever loan you choose, there are myriad options to help you make the most of your financial situation. Take your time, do some research and find the best loan for your needs.