There are so many loan options available on the market, so it can be a little overwhelming to know where to start. With each offering various pros and cons, and varying amounts and terms, it can become confusing. In this post, we have detailed different types of loans and who they may be useful for.
A personal loan is money that is usually borrowed at a fixed rate and repaid over a fixed term that the borrower chooses. They can be secured against an asset for collateral, which may result in reduced interest, or unsecured to reduce the amount of risk for the borrower. Personal loans are common and people take them out for a variety of reasons, including paying for home improvements, a holiday, or a wedding.
Within personal loans, you will also find loans for bad credit, which are designed to help those with poor or no credit secure finances based on affordability. If repayments are made on time, this type of loan can help to boost an applicant’s credit score.
Debt Consolidation Loans
A debt consolidation loan allows applicants to merge their existing debts into one figure and borrow money to pay off the amount. This helps to make debts easier to manage and provides borrowers with a way to effectively keep track of their cash flow. As the repayments are made on one debt figure, rather than multiple amounts, this type of loan can give people peace of mind.
Business loans tend to be similar to personal loans, but they are designed specifically for business use only. The lender will transfer you a certain sum of money to be repaid with interest over a number of year, depending on your needs and affordability. If you have a business and are looking to make investments in your infrastructure or grow your workforce, this is a loan designed for you.
A guarantor loan is a form of unsecured personal loan that relies on a third party to manage repayments if the original applicant defaults at any time. The guarantor is used in place of a high value asset in a secured loan. These types of loans are typically suitable for individuals with poor or no credit history who may have been turned away by other lenders, but still require access to funds.
Bridging loans allow applicants to ‘bridge the gap’ when they need to pay for something, but are waiting for the funds to become available to do so. This type of loan is mainly used by individuals who are purchasing a property, but are having to wait for the sale of another property to clear first. They are often secured loans, so you may be required to guarantee repayments against an asset.
This type of loan is secured against your property, so they are only available to homeowners. These loans can be either long term or short term, but if you miss repayments, your home may be repossessed, so there is an element of risk.
If you need any more guidance or help on the types of loans available, or which would suit your financial situation, please seek advice from the relevant financial support services.