Are you looking to buy a new car? Or do you want to renovate your house? Maybe even take your family on a fun-filled holiday? Are the digits in your savings account holding you back from living your life to the fullest? There’s no need to worry. Take a loan and give you and your loved ones an experience that will last them a lifetime.
If you are looking to apply for a loan amounting to less than £5,000, consider using a credit card or an overdraft. But, for larger sums of money and elongated payback durations, loans are the way to go.
Categories of Loans UK
There are a plethora of loans available, making it confusing to choose what type of loan is best suited for you. Before you go looking for cheap loans, you need to think about what type of loan you want and for what purpose. There are two main types of loans UK, and these are known as unsecured loans(a.k.a. personal loans) and secured loans(a.k.a. homeowner loans).
- Unsecured Loans
An unsecured loan, also referred to as a personal loan, is when you borrow an amount of money without collateral, meaning the loan isn’t secured against anything you own. Unsecured loans are beneficial if you want to clear your credit card, make a large purchase, or make some minor renovations to your home. You can avail this type of loan from a bank, or an online lender, or even a business.
In most cases, for unsecured loans you can borrow up to £25,000, however, there are few money-lenders that offer double that amount. Typically, with unsecured loans, you need to pay back your loaned amount in a time span of 1-7 years.
Possessing a good credit score will help you get the best loan rates on whatever loan you are planning to apply for because when an individual is seeking a loan, UK lenders will go through your credit history and credit rating and determine whether or not to give you a loan. They also determine how much money can be allocated and how much interest is to be charged on the loan. If you have a poor credit score, you could be denied the loan or be offered low amount loans with higher interest rates.
- Secured Loans
Secured loans are also known as homeowner loans because the loan is secured against your home or another equally valuable asset that you have in your name. Therefore, you cannot procure a homeowner loan unless you have a house or something of equal value.
Loans UK lenders will decide the amount you can borrow based on the value of your home. They also perform the procedural credit rating and history background checks and the other minor things usually looked into by loans UK lenders. Secured loans can go up to £100,000 and span over 25 years.
If for some reason you are not able to repay your loan, the lender can claim the collateral, which means the lender can repossess your home or whichever asset is secured against the loan you have received, and sell the property to make back the unpaid loan amount.
If you are looking to register for a secured loan, it is important to be a hundred percent sure that you will be capable of paying back the loaned amounts in its entirety. This involves being prepared for those periods when you might be unemployed due to a bad job market, as well as account for extra expenditures that you won’t be able to avoid, such as medical bills and other essential payments.
Loans UK Citizens with Bad Credit
It will be harder for someone to avail a loan with good interest rates if you have a bad credit rating, but it doesn’t mean that you won’t be able to get a loan at all. Though there aren’t as many options available, there are loans UK agencies that specially cater to people with bad credit.
- Bad Credit Loans
For those of you with bad credit ratings, a bad credit loan could be just the thing for you. Unfortunately, these loans have a higher interest rates and lower amounts of credit associated with it. Bad Credit loans do cost more, but you will have better luck in procuring this type of loan over others. If you do take up a bad credit loan and make sure your monthly repayments are prompt as this will help increase your credit score and maybe even get you out of that bad credit zone.
- Guarantor Loans
This is another type of loan for those citizens in the bad credit sector.
A Guarantor Loan is when a friend or family member agrees to be the ‘guarantor’ of a loan on behalf of the person receiving the loan, meaning that if you have missed a payment on this loan, your guarantor will be required to make the payment. When used wisely, this loan can help create a credit history for young or poor people and help them be in a better position to take a loan in the future.
APR – Annual Percentage Rate
The Annual Percentage Rate is the percentage on the total loan amount that you will be paying as interest and other fees. It’s the extra amount that you will have to pay to the lender aside from your loan itself.
APR is an easy way for an applicant to calculate the best loan deals. The APR includes the interest amount and other fees as a percentile on the loan, making it easier to calculate the total extra amount you need to pay back.
If you’ve ever browsed through Loans UK Agency websites, you’ll notice that all the top loan providers mention an APR against their offered loans. However, not everyone will receive the same rate as this is also based on your credit score and credit history.
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