There are several loan types available in the UK for customers to enjoy.
These loans range from large property loans to small payday loans that can be obtained online and we’re going to take a look at each of these in turn.
Who can take out a loan?
A loan can be taken out by anyone, provided that the customer meets the lender's minimum requirements and that an agreement detailing the repayment amounts and dates is signed.
However, due to the high rate of financial crime in the UK all lenders must be registered and licensed with the relevant regulatory bodies. Customers can apply for a loan at a registered lender or a traditional bank.
Types of loans found in the UK
There are two types of loans you can find in the UK, which are secured and unsecured loans.
- Secured loans - with this type of loan, collateral is needed when you are applying for it. All secured loans are usually accompanied by low-interest rates. However, when you fail to repay your loan, you are at the risk of losing the collateral.
- Unsecured loans - they do not require security. They have higher interest rates as compared to the secured loans and generally do not offer amounts as high as those available with secured loan options.
Secured loans in the UK
#1: Home loans - you can apply for a home loan when you want to finance the purchase of a property. You can buy either a new build or an existing home as well as make an investment.
Home loans require that the applicant meet strict lending criteria which includes affordability requirements as well as legal requirements. Furthermore, a home loan can also be used to consolidate debts to lower the interest you pay on that debt as well as be a useful tool for savings.
Features of home loans
- You can pay back a home loan over 1 to 35 years
- You are allowed to borrow up to a set percentage of the value of your property
- You pay interest for the duration of the loan term
- You should pass a credit and affordability check
#2: Bridging loans - these are loans that will help you buy a property while you are waiting for the transfer of your existing home. It is used to bridge the gap between making a purchase and other funds from the sale of your property becoming available.
You can use them for the following:
- Buying a property
- Property development
- Buy to let investment
- Business ventures
- Paying a tax bill
- Divorce settlement
#3: Logbook loans - it is a loan secured on your vehicle, so the lender owns your vehicle until you pay the loan back. You may either be allowed to keep and use the vehicle or may have to hand it over to the lender until your repay your loan.
#4: Vehicle finance - is a loan borrowed to buy a vehicle. You do not own the vehicle until the agreement ends since the finance agreement is normally secured against it. Vehicle finance can be used to finance both new and pre-owned vehicles.
#5: Debt consolidation loans - it allows you to combine multiple debts like credit card bills and personal loan, by taking out a single loan at a lower interest to pay them off. You can use your home loan to consolidate debt or simply take out a secured loan.
Unsecured loan options in the UK
#1: Personal loans - they can be used for just about anything from repairing appliances and refurbishing your home. With personal loans, you can even take yourself as well as your family for a holiday or finance a wedding. They are accessible everywhere, from online lenders and peer to peer platforms to traditional banks.
#2: Peer-to-peer or social loans - it is closer to investing than it is to lending. It is a way to loan money to borrowers using an online platform and it matches investors wanting a high return with borrowers needing a low-interest rate.
#3: Guarantor loans - it is those loans where you ask someone close to you to be a guarantor. A guarantor can be a friend or family. When you fail to repay the loan the guarantor acts as a backup to repay the loan
#4: Bad credit loans - they can be obtained by people who have a bad credit score. Although a bad credit loan is similar to other personal loans or secured loans, they are more expensive as the lender takes on a greater risk by lending to the individual with poor credit.
#5: Some debt consolidation loans - although debt consolidation loans are generally secured, some are not. They are also used to combine different debts and make them one. It is a way of reducing your debt and reorganize it to make it easier to manage and more affordable to pay off.
#6: Business loans - you can only apply for a business loan when you need funds to help your business grow or expand. Business loans allow you to borrow between £1,000 and £3 million and pay the loan back over 1 month to 15 years.
Getting a loan is easy & simple
There are a wide range of loans available in the UK and whether you’re looking to apply for a secured or an unsecured loan, you can make your application online.
You can apply for a loan online or visit traditional banks and finalise the application within hours. The important rule of applying for a loan is that you should be over 18 years and a resident in the UK.
Never apply for a loan that you can't afford in the long run. As much as loans can be considered as a path that leads to a goal, too many of them can harm your credit profile and cause you grave financial hardship. When applying for a loan, choose only the amount you only need.