When you get a loan, you borrow a certain amount of money and agree to a set repayment schedule. Loan repayments are typically more predictable than credit cards, which can make them easier to budget for – although their rates may be higher for borrowing small amounts.
There are several different types of loan, each with their own risks and benefits – it’s important to know which type suits you before you apply.
We’ll help you understand the main types of loan, and show you where to find more information about them:
Personal (unsecured) loans
Personal loans allow you to borrow relatively small amounts, e.g. £1,000, although they can go much higher. Many people use them to spread the cost of a large purchase, such as a holiday, new car, or wedding. You won’t have to use an asset (such as your house) as collateral, which means less risk for you. However, you’ll probably need a high credit score to get a good interest rate.
These loans use an asset, such as your home or car, as collateral – meaning you could lose the asset if you can’t keep up with repayments. But a secured loan can still be suitable if you’re confident you can stick to the payment schedule. Collateral lowers risk for the lender, so you may be able to get better rates or higher amounts with a secured loan – even if your credit score’s low.
These loans require you to have a guarantor: someone who promises to repay the loan if you can’t. This is usually an older relative or friend, although it can be almost anyone who meets the lender’s criteria. These loans carry risk for both the guarantor and borrower – but if you have a low credit score, using a guarantor can improve your chances of acceptance.
Car finance loans
Need to spread the cost of your new wheels? There are several ways you can finance a car, whether you want to buy it outright, pay for it in instalments, or just rent it. Each option has different pros and cons, so there’s a lot to consider before you apply.
Just remember, we're not a lender, we're a credit broker for cards and personal, car and guarantor loans, working with a selection of lenders and brokers.† This means we don’t provide credit, but we can help you find and compare different offers all in one place.Compare loans with Experian