Loans allow you to obtain finance for a variety of reasons by offering you a lump sum of money that you pay back over a pre-agreed term, with additional interest.
If you're over the age of 18, are a resident of the UK, and you aren't bankrupt, then you could be eligible to take out a loan. The type of loan that you apply for will depend on your circumstances, and your reasons for borrowing, while the terms you are offered may depend on your credit record.
What different types of loans are there?
There are many different loans available on the market today, each tailored to fit a particular set of circumstances.
Some of the loans you might choose from include:
- Unsecured loans
- Secured loans
- Business loans
- Guarantor loans
- Bad credit loans
How do I apply for a loan?
Applying for a loan today is quite simple. Simply speak to the company you would like to take the loan out with, and they will provide you with the correct paperwork. Eligibility checkers online will give you an indication of your chances for success with any application.
What are the pros and cons of loans?
For a lot of people, at some point during their lives, a situation will arise in which loans become an essential part of paying for something crucial - like student education or a new car.
Loans are a very useful way to help you take the next step in your life financially - however, they can represent significant problems for your future if you take out a loan that you cannot afford to repay. Just make sure you never borrow more than you can afford to pay back.
What has an impact on interest rates?
Interest rates on all kinds of loans can vary across the market, but usually - the more you borrow, the lower the rate is. Some other circumstances that could impact your interest rate include:
- The term you request for the loan
- The value of unsecured and secured debt you already have
- Your credit information and previous credit activity (over the last six years)
- Your monthly income (and ability to repay the loan)
- Whether you have an existing account with the bank, building society, or union offering the loan
What is a credit check?
Once you've chosen the kind of loan that you need, your lender will perform a credit check to assess how likely it is that you will be able to repay the money you borrow.
Credit checks involve finding out information about your financial history, such as whether you're prone to late payments, whether you've missed payments in the past, or whether any County Court Judgements have been made against you.
Your credit check could impact the amount you're allowed to borrow, and the terms of your loan (e.g. the interest rate could rise or fall).
What does APR mean?
When you're searching for a good loan deal, you'll need to consider APR - a term which stands for 'annual percentage rate'. This figure shows you the rate of interest that you'll need to pay across a year, taking into account fees such as admin and charges.
How do I find the cheapest loans?
The cheapest loans are often reserved for those with the highest credit scores. However, you can improve your chances of a better deal by shopping around to see which providers are offering the best terms and lowest APR.