What Are The Different Types Of Loans?
There are so many different types of loans that it can be confusing deciding where to start looking.
Going for the wrong types of loan can also cost you more or prove to be too high risk.
Depending on what you need the money for, and for how long, will often determine the type of loan you should apply for.
Generally speaking, loans fall into 2 categories. Secured Loans and Unsecured Loans.
Whats are Secured Loans?
Secured Loans are loans that have an asset attached to them.
In the event you are unable to pay, the asset can pay the balance of the loan instead.
What are Unsecured Loans?
Unsecured Loans do not have anything attached and so you just pay back the loan, usually, in instalments.
QuidMarket is a provider of unsecured loans from £100 – £1,500 over 3 – 6 months.
Here we look at some of the main types of Unsecured Loans and how they can help you depending on your needs.
Types of Loans Unsecured Loans
Short Term Loans
What are Short Term Loans?
A short-term loan refers to an amount of money borrowed and repaid in less than 12 months. With short term loans being for smaller, unsecured amounts, they attract a higher interest rate which is governed by the APR.
Same Day Loans
What are Same Day Loans?
A same day loan is another name we use for our short term loans, as the cash is normally sent the same day the loan has been approved.
What are Payday Loans?
Payday loans are loans of up to £1,500 paid into the customer’s bank account to tide them over until their next payday.
Always bear in mind payday loans are expensive and could even make your financial situation worse if you don’t pay it back on time.
What are Guarantor Loans?
A guarantor loan is underwritten with a third party attached to the loan.
In the event you are unable to make the repayments the third party will be responsible for this. This will usually be a family member or friend.
This type of loan is usually for people with bad credit as they are more likely to be accepted for a loan with a guarantor.
Bad Credit Guarantor Loans are usually for a higher amount and a longer-term than a Bad Credit Pay Day Loan.
Bad Credit Loans
What are Bad Credit Loans?
Bad Credit Loans usually come with higher interest rates to offset the higher risk.
These loans are usually for people who have a bad credit history (or no credit history at all) and are struggling to obtain credit elsewhere.
Sometimes called Credit Builders these loans can help people improve or start their credit history to make it easier and cheaper to borrow in the future.
Types of Loans Secured Loans
Log Book Loans
What are logbook loans?
Log book loans are a type of secured loan. These are secured against your vehicle and mean the loan company will own your vehicle until the loan is repaid.
Having a log book loan does not mean you have to stop using your vehicle, however, if you fail to make the repayments the loan company may repossess your vehicle.
What to consider when taking out different types of loans
Once you have decided that borrowing is the only option for you, there are many things to consider.
How much do you need to borrow?
The most important factor when considering a loan is working out exactly how much you need and stick to it. As tempting as it may be, only ever borrow what you need to make sure you pay back only what is necessary.
If you think about it, taking a loan is the same as any large purchase so it always pays to shop around.
Compare things like the APR (Annual Percentage Rate), the Total Amount Repayable, and any other charges or fees.
For example, taking a loan for a shorter amount of time may have a higher APR, but when you add up all the repayments the total amount repayable may be more.
At the same time, taking a loan that has a smaller Total Amount Repayable may have larger instalments to pay back each month so it does depend on your circumstances and needs.
Play with the sliders on the QuidMarket homepage to see how the amount and length of the loan can affect the monthly repayments.
Am I eligible for a loan?
Always check the small print and eligibility criteria before applying. Sometimes the headline APR advertised is only offered to a small number of customers, especially if you are applying with a bank who offer preferential rates to their customers.
Some companies now offer a pre-check that can give you an idea if you will be accepted before applying and so not leaving a footprint on your credit file.
Are there any other charges or fees?
Before applying or accepting a certain loan it is always worth looking into and comparing the various fees or charges a company can impose.
For example, some providers will apply a charge if you want to pay the loan back early to recoup the interest they are missing out on. Other companies may apply a Late Payment Fee or Default Fee if you miss a payment.
Here at QuidMarket, we do not charge any fees, charges or additional interest so what you signed up for is what you will pay.
Should I reapply?
Most of the time you will leave a footprint each time you apply for a loan. Lenders will look at your credit file before approving/declining the application.
Having a large number of footprints on your credit file can have an adverse effect on your application and may make you seem higher risk.
This could then make obtaining credit more difficult or expensive.
What types of loans do QuidMarket offer?
QuidMarket is a short term lender who offers short term personal loans from £300 – £1,500 repaid over 3 – 6 months for new customers. Repeat customer can apply from between £100 – £1,500 which can be repaid over 3 – 6 months.
If you need to apply for a short term QuidMarket loan you can do this on the website too.
Is QuidMarket licensed by the FCA?
Here at QuidMarket, we were approved for a license by the FCA at the first time of asking – a very proud day for us all.
This approval from the FCA underlines the commitment to our customers and shows us as a reputable, transparent and honest lender.
QuidMarket trades under FCA license number 677995 – you can view the FCA Register on their website.