When You Need to Borrow Money, You Will Have Many Options

Choosing the right loan isn’t a case of clicking and hoping for the best. Different loans suit different people and different financial situations. Finding the right loan can help you to save money.

What Loan Options Are Available?

Most loans are standard unsecured loans, but other options might be more suitable if you have a poor credit history. These include guarantor loans, secured loans, logbook loans, instalment loans and payday loans. You can apply for most loans online.

If you need to borrow money, there are many different types of loan available. Loan options include guarantor loans, secured loans, logbook loans, instalment loans and payday loans. You can apply for most loans online.

The right loan can be easier to manage, or the right choice might improve your chance of approval.

Read on for information about many of the most popular personal loans, and who they’re most suitable for.

Looking for other information on Loans? This guide has info on 'What are my options for a loan?. We have also writen extensively about:

• - No Guarrantor needed for new loan
• - Do I need a credit check for a loan?
• - Poor credit loans explained

We update all our guides regularly. If you are researching loans and we haven't got an exact guide that helps you, keep coming back as we update daily.

What Is a Loan?

Before you consider borrowing money, it’s important to know what a loan is.

A loan is an amount of money that you’ve borrowed from somebody else. They come in many different shapes and sizes, for all different values and amounts.

Applying for a loan means quick access to money that you might need very quickly. It means that you can buy something straight away and don’t need to save in advance.

Loans cost money. You won’t just pay back what you borrowed, but also interest on top. Taking out a loan, then paying it back, is more expensive than saving on your own. You may be willing to take on this extra cost in exchange for instant purchasing power.

There are many different types of loans. If you’re applying for a loan the types of credit on offer should all be carefully considered. The best types of loan for one person might not be the best for someone else, and you may be able to save yourself some money by shopping around and comparing.

According to the FCA Financial Lives Study in 2017, of those people who had a loan:

• 3% had borrowed less than £1,000
• 15% had borrowed £1,000 to £4,999
• 32% had borrowed £5,000 to £9,999
• 27% had borrowed £10,000 to £19,999
• 7% had borrowed £20,000+
• 13% preferred not to say how much they had borrowed
• 4% didn’t know how much they had borrowed

How Do Personal Loans Work?

There are many different types of personal loan, though they all work in roughly the same way.

When you’re approved for a loan you become a debtor and you’ll owe the money back to your creditor. Usually, you’ll get your money in a lump sum payment. You might then be asked to pay it back in one go, or to repay in several instalments.

How Do Bank Loans Work?

Bank loans are personal loans that are offered by regulated banks. Types of bank loans can range from large loans (like mortgages) to smaller loans for anything you need.

When you apply for a loan from a well-known bank, you know that you’re in safe hands. Banks are regulated lenders and you’ll be able to contact them easily. However, there are many alternative sources of loans and another UK loan company may be better suited to your needs.

Secured and Unsecured Loans

Broadly speaking, you can fit a loan into one of two categories. An unsecured loan isn’t protected by anything else that you own. If you can’t repay this loan, there’s nothing the lender can do. A secured loan will be secured against another item you own.

Usually, loans are secured against houses and cars. If you can’t repay your debt, the lender has a right to repossess your home or your vehicle. Sometimes, loans can be secured against other valuable belongings.

If you apply for an unsecured loan, you can’t lose your home or your vehicle. From your perspective, an unsecured loan is less risky. For a lender the risk is higher, since they may not get their money back. Usually, lenders balance this risk by charging higher loan interest rates.

Secured loans may be cheaper. You might also have a higher chance of approval. If you apply for a secured loan, you should be comfortable with the prospect of losing something you own. Don’t assume that you’ll be able to keep up with repayments, as circumstances can change overnight.

Guarantor Loans

If you’ve got poor credit, a guarantor loan can help you get the money you need. Lenders will need your loan to be backed by someone you know.

Lenders will have their own guarantor criteria, though a guarantor should usually be a homeowner with a good income. If you can’t repay the money you own, your guarantor will take responsibility.

It can be very difficult to find a loan guarantor. This is someone that might need to pay for money that you’ve borrowed and used. Guarantors are responsible for someone else’s loan, so you’ll have to find someone that trusts you to keep up with your repayments. You don’t have to choose a family member, though they may be more likely to help.

If a loan is backed by a guarantor, the risk for a lender is lower. These loans might have lower interest rates. You might also be more likely to get loan approval.

Payday Loans

Payday loans are short-term loans to bridge the gap between one payday and the next. You may need to clear your debt within the next 30 days or might pay in monthly instalments.

Payday loans are usually relatively small. They’re designed for emergencies, to help if you don’t have any savings. Payday loans can be helpful, but they’re also expensive and it’s easy to get into a spiral of debt.

If you’re borrowing money from a payday loans company, make sure you have a way to repay it.

Logbook Loans

Logbook loans are secured loans that don’t require you to be a homeowner. Instead of securing a loan against your home, it’s secured against a car or other vehicle.

Lenders will find out the value of your vehicle, then lend money against your car’s value. The more valuable your car, the more money you’re likely to be offered. Lenders will usually ask for your logbook and take temporary ownership. You’ll usually still be allowed to use the car whilst you’re paying off your debt.

If you make loan repayments on time, your logbook will be returned. If you can’t repay your debt, the lender can keep your car. Usually, they’ll sell your car and use the money to wipe your debt. If your car’s value has dropped through the loan term, you might still owe an outstanding balance.

Logbook loans are very risky. You stand a chance of losing your car, and shouldn’t ever go down this route if you need a vehicle to get to work each day. Only offer your car as security if you could cope without it.

The benefits of logbook loans come in the form of higher approval rates. You might also find that a logbook loan is cheaper than some alternatives.

Instalment Loans

Most personal loans fit under the instalment loan category. These are loans that you’ll pay back over two or more months. You’re likely to pay a monthly instalment each month until your debt is paid off, though some loans need to be paid back in weekly instalments instead. You may have a larger instalment at the start, or balloon payment at the end.

Using instalment loans, you can spread the cost of your debt. You don’t need to pay the money back all in one go. Before applying, check that the instalments fit well into your monthly expenditure. Budget to make loan repayments on time.

If you can’t afford your repayments, you may feel forced to take out more loans and you’ll quickly get into bad debt.

How Can Money Savings Advice Help You With Getting a Loan?

Here at Money Savings Advice, we have partnered with some of the UK’s leading loan broker companies. They have already helped thousands of people get the best loan that suits their needs, and they can do the same for you.

Choosing an independent loan broker means they won’t proceed with an application unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these loan brokers who can help you get a loan, then click on the below and answer the very simple questions.