Different popular loan types

Taking out a loan is a necessity for most people at some point in their lives, as there are many things that most people would be unable to purchase outright without the help of finance. Over the years lenders have developed a wide range of loans to suit all needs and circumstances, and you will find that there are loans to suit most needs and circumstances with many different lender to select from. Loans are available from wide range of financial institutions from online lenders and specialist lenders to high street banks and building societies.

When you take out a loan a number of different factors are taken into consideration, and this helps the lender to determine whether you are eligible to take out a loan through them and also what sort of interest rate you will be charged. These factors will also help to determine the amount that you will be able to borrow and the nature of the loan that you will be able to take (i.e. whether you are eligible for a secured or unsecured loan). Amongst the factors that are taken into consideration to make decisions such as this are: your income, your outgoings, your age, your financial status, your employment status, and your credit rating.

Homeowner loans: A homeowner loan is a secured loan and is secured against your home, and therefore is only available to homeowners. These loans can be used for a variety of purposes, and because they are secured the repayment periods are longer and this means that you can spread the amount that you borrow over a longer period thus keeping your monthly repayments down. Many lenders will also consider those with bad credit for a homeowner loan, as the secured nature of the loan means increased security for the lender hence the risk is not as high. You can enjoy increased borrowing power when it comes to this type of loan, although the amount that you can borrow will also be based on the amount of equity that you have in your home as well as on other factors. The downside to these loans is that if you default on payments you could risk losing your home.

Unsecured loans: An unsecured loan is available to non-homeowners as well as homeowners, and this is because these loans are not secured against any asset. The borrowing levels are lower than with homeowner loans, and usually lenders offer between £1000 and £25,000 depending on your circumstances. The amount that you can borrow will depend on your income and outgoings, as well as your credit history. The repayment periods are also shorter, and are usually between 1 and 7 years, although some lenders go up to 10 years. One of the downside to these loans is that they are not usually available to those with bad credit.

Consolidation loans: A consolidation loan can be taken on a secured or an unsecured basis depending on your circumstances, and you can use these loans to pay off smaller, higher interest debts and enjoy just one monthly repayment as well as reducing the amount that you have to repay each month. One of the downsides to this type of loan is that it is easy to let your debt spiral out of control by wrapping up things like store and credit cards with a consolidation loan and then spending on the cards again.

Home improvement loans: A home improvement loan is normally taken out on a secured basis, and these loans are used to carry out various home improvements. This type of loan can help to bring your property up to scratch and can help to also improve the value of your home. On the downside, using this type of loan for the wrong home improvements could end up devaluing your home.

Bad credit loans: Bad credit loans are loans that are offered to those with questionable credit histories and low credit ratings, and these loans are usually offered on a secured basis because of the risk to the lender. These loans provide an effective way for those with bad credit to raise finance but on the downside interest rates charged can be very high.

Car loans: Car loans are available from a number of specialist lenders and high street banks, and are used to finance the purchase of a car. These loans enable you to purchase a car and then pay it off in monthly instalments. There are many other types of car finance available in addition to loans, so you should check what’s on offer to see which is best suited to your needs.

Payday loans: Payday loans are short term loans that are offered for short periods of time to tide the borrower over till payday. No credit checks are involved with these loans, but you will need to provide certain documentation such as proof of income and bank account. The fees charges can be expensive on these loans, but they can prove invaluable if you find yourself running into financial problems before payday comes around.