A loan may seem to be a simple enough product as the borrower agrees an amount of money to borrow, accepts terms and conditions, and repays the loan together with interest in an agreed time period. However, considering different options and thinking twice about the best variant to suit your needs can save you a lot of money. In addition, taking your time and comparing credit deals may help you avoid risky options such as expensive overdrafts or doorstep lenders.
Our beginner’s guide to loans is aimed at sharing the key points of getting a loan and all the necessary nuances. As you may know, there are many kinds of loans, so it’s important to shop around and do your own research. Another key point is that the amount you can borrow and the interest rate usually depends on your credit score and other circumstances. Let’s get into more detail.
Different Loan Options
A personal loan is the most widespread choice for people who are new to borrowing, and this type of loans is often called unsecured. Another option is to take out secured loans in case the borrower can secure it against their home or another asset. It’s significant to find the right loan that will help you solve your financial issues. Borrowers can apply for secured Personal Money Service loans if they have assets they can use as collateral. This money can be used for financing an expensive purchase, paying off the debts or repairing your credit history.
One more fast-growing and innovative type of lending apart from traditional options is peer-to-peer lending. After that, there are also more problematic and risky options such as logbook loans, payday loans, and doorstep lenders. The last three options are notorious and well-known for having high interest rates and charges when the borrower can become trapped by debts that are unaffordable. So, it may not be the right choice for potential borrowers. Here is the list of the best peer-to-peer lending platforms for investors, according to Forbes.com.
How Much You Can Borrow
Depending on the existing debt or other circumstances you can borrow the different amount of money. You can also take into consideration other credit facilities such as credit card or an overdraft that you may use as the lenders want to be sure you won’t burden yourself with an unaffordable debt. Generally, the majority of lenders will agree to give you a personal loan of no more than £25,000. If you want to borrow more, you need to be ready to secure it against something like a house or a car. The following alternatives can be considered in case you need just a small loan.
Of course, there are other alternatives to loans and ways to borrow the necessary cash. For instance, if you have savings then spending these funds in case of emergency can be a better idea than applying for a loan. As a result, you will definitely pay more in interest than you would make on your savings.
Another alternative is taking a credit card if you just need a short-term financial help and you are sure you will be able to pay it off in a few months. But you need to be certain you can afford it and will easily clear the debt over time as the interest rate charged for a credit card is often higher than that for a loan. Also, for those who have a poor credit score, there are loans from credit unions with affordable interest rates. All in all, think twice before you make the decision which type of loan is best for you and use our tips to make the right choice.