Types of loans

understanding the loan landscape

There are lots of different reasons why people take out loans, and the marketplace is vast, with plenty of rate and payment options. It’s worth comparing different loans so you get the one that’s best suited to your needs. Some types of loans are detailed below:

Personal (or unsecured loans)

They tend to be up to £25,000 and last for up to 5 years. They are often used for buying a car or doing home renovations and don’t require you to secure them against an asset (like your house or car).

Secure car loan

You’ll need to provide your car as security to guarantee that you’ll repay the loan. The loan will need to be repaid in full at the end of the loan period and the car could be repossessed if the debt is not paid off.

Guarantor loans

Typically up to £10,000, a family member or friend agrees (‘guarantees’) to make repayments if you can’t -they could be useful if you can’t get a personal loan due to your own credit history.

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Loan or credit card?

For some people, it could be more beneficial to use a credit card rather than take out a loan. For example if you want more flexible monthly payments or if you’re able to get a long-term low or 0% purchase rate.

If you do choose to use a card, then it’s important to pay the card’s minimum repayments. And if you can pay off the balance by the end of any promotional term you could avoid paying unnecessary interest.

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