Accessing a suitable loan is often a tough challenge as they differ in repayment periods, structure and interest rates. As a result, it is important to understand the various types of loans that you can adopt for conveniently.
Generally, you can either access a secured loan or an unsecured loan. While a secured loan requires you to tender an asset or collateral before accessing the loan, an unsecured loan does not require any form of asset or collateral to be tendered before accessing the loan.
Additionally, you can access both the secured and unsecured loans from a UK Credit Private Money Lender. Here are six (6) types of loans you can opt for and how their usage applies.
A personal loan is one that can be used for anything. Depending on the lender, a personal loan can either have a fixed or variable repayment plan and interest rate.
Although personal loans have higher interest rates compared to other types of loans, it can even be higher for those looking for smaller amounts or those with lower credit ratings. On the other hand, loans with longer repayment periods have lesser interest rates but costs extra to pay off.
This type of loan is often a short-term loan and it has a high-interest rate. Just like its name, this type of loan is to be repaid in full on payday.
Payday loans come with high-interest rates and can lead to more debt. Failure to repay will affect your credit score.
You can access a car loan in four different ways. Firstly, it can be as a personal loan as mentioned above, a hire purchase, lease, or a personal contract plan.
A lease is a form of loan that requires the borrower to pay a certain amount monthly to use the car for an agreed mileage after which you can then return the car.
With this plan, the amount to pay monthly will depend on the type of vehicle, maintenance cost and damages.
This type of car loan allows you to use the car while you pay an agreed amount monthly. Just like with the personal contract plan, you do not own the car until you have made the last instalment payment.
It is also worth mentioning that some hire purchase plan may require an initial deposit, while the rest of the cost is shared within a specific number of months. More so, failure to abide by the monthly payment schedule can lead to a repossession of the car.
Personal Contract Plan
This type of car loan requires the borrower to pay a certain amount as a deposit with the option of either paying a lump sum to own the car, trade the car for another one or even returning the car at the expiration of the contract.
Unfortunately, you do not get to own the car during the deal. Hence, you are unable to sell or modify the car, and you must also adhere to the agreed mileage limit.
This is a type of loan that is taken to finance the purchase of a house. It can be accessed from a building society, bank, mortgage broker or other private lenders.
The amount you can access often depends on your income, expenditure, deposit, the value of property and credit score.
This type of loan involves borrowing money that you can repay monthly. Some lenders charge interest rates others do not.
With this type of loan, the higher your credit score, the higher the amount you can access.
Home equity is also referred to as the second mortgage as it involves the use of your home as collateral. The amount to be accessed depends on the home’s market value minus the amount of mortgage remaining.
Just like a mortgage, this type of loan also requires a good credit score and has a fixed repayment period and interest rate.