From time to time, we all need help financially. Taking out a personal loan can be a good solution, providing you find the right type of loan for your individual circumstances and needs.
With a huge choice of personal loans out there, it can be difficult to navigate the marketplace as a consumer. Should you consider instant payday loans or would a long-term secured loan meet your needs better? If the first is the most suitable option for you, you can apply to get a loan from such lenders as MoneyBoat, which offers several other loan options as well. There are various matters to consider when filling in an application for a payday loan, short-term loan, or any other personal loan and it pays to be prepared. Here’s a simple guide to help you find the perfect loan for you.
Types of loan
Initially, it’s helpful to separate personal loans into two categories: unsecured and secured. Here’s we have in collaboration with the experts at supermoney.com the best picks for personal loan!
Unsecured personal loans
Unsecured loans are offered to consumers without the need for an asset, such as property, to be offered up as security. Unsecured loans come with greater risks for lenders and, therefore, are usually for lower amounts, over a shorter term, than secured loans. They also come with higher interest rates.
Secured loans are those that you take out against an asset, usually in the form of a property. A typical secured loan is a mortgage, for example. These loans are usually offered over a longer period of time – up to several decades, and loan values can also be much higher. Interest rates are lower but consumers stand to lose their home if they are not able to keep up with their repayment responsibilities.
Types of unsecured loan
Payday loans and short-term loans
If you need access to cash quickly, in order to meet unexpected costs, for example, you can consider payday loans. These online loans are easy to apply for and, providing you meet the lending criteria and pass any credit checks, you could have the money in your bank account as quickly as in an hour. Payday lenders will usually give you access to up to around £500 over a period of weeks or months, depending on their individual lending criteria and your eligibility.
When deciding which payday lender to apply with, it’s better to pay attention to the payment terms available on lenders’ websites. Some payday lenders will ask for full repayment on your next payday, but others will allow you to spread your repayments over a number of installments. Either way, borrowers will often be able to access cash within hours of applying online for a payday loan.
Once you have identified whether a payday loan is a proper fit applying for it online is very simple, with just a few straightforward pieces of information usually required. If you have done decent research beforehand and find yourself to be eligible, there’s no reason you can’t have the money you need at this very moment.
Watch out for: Interest rates can be very high and you should only consider lenders who are authorized by the Financial Conduct Authority and who lend responsibly.
Long-term bank loans
Banks and building societies still offer personal loans at decent rates. You may be able to borrow several thousand pounds over a number of months or years with regular repayments that suit you. However, you will usually need to meet strict lending criteria and have a good credit rating to be considered.
Watch out for: You may trust your high street bank but they may not offer the best rates and terms on personal loans so always shop around.
Long-term online loans
Over the past few years, a large number of online lenders have emerged, offering consumers more choice in the personal loan marketplace. These alternative lenders can sometimes offer better interest rates and more flexible terms than banks and building societies. Loan amounts and terms will be similar to loans offered by banks and you will need to meet certain lending criteria and pass a credit score check.
Watch out for: Check online lenders’ terms and conditions carefully as you won’t have the opportunity to ask questions in person.
Other forms of unsecured loan:
- Car finance
- Credit union loan
- Guarantor loans
What can I use unsecured loans for?
You can use unsecured loans for any purpose you wish. Payday loans and short-term loans are often taken out by those who need emergency cash. Borrowers may need to pay a mechanic to fix their car or could have school fees to pay, for example. Long-term personal loans, on the other hand, are often taken out to consolidate other debt, such as credit cards and store cards. They can also be used to pay for larger expenses like renovations and weddings.
Types of secured loans
The most common type of secured personal loan is a mortgage, taken out to buy a domestic property. Mortgage lenders offer up to £1 million or more to help homebuyers meet the cost of their property. The loan itself is secured against the value of that property and if the borrower is unable to repay the mortgage, the lender can force a sale of the property to meet the outstanding debt. Interest rates can be very low for mortgages and they can be repaid over several decades. You will need to meet strict lending criteria to take out a mortgage, providing clear evidence of your ability to repay the loan.
Watch out for: Arrangement fees and early repayment fees can apply. Ensure that you have the means to repay the loan over its entire life, or risk losing your home.
Other forms of secured loan:
- Bridging loan
- Homeowner loan/second charge mortgage
What can I use secured loans for?
Secured loans are usually used to help pay for a property, but can also be taken out to help pay for other large items. You can sometimes take out further mortgages on your home to help cover the cost of renovations and extensions.