About Loans

About Loans

Borrowing a bit for...

Whether you are borrowing to make some home improvements, buy a new car or consolidate your debt, loans can be a complicated matter. Loans fall into three main categories, which is expanded upon below and further in our "different types of loans" section. Taking out a loan should be a carefully considered decision as you are entering into an agreement with a financial institution like bank.

Before borrowing, try our loans checklist!

A loan can be an excellent way to access finance however it makes sense for you to ask yourself a few questions before taking this loan out. Consider it a checklist before you commit to years of paying a loan back!

Is a loan the correct choice for you? - Sounds a bit of a stupid question, but have you considered an overdraft if you just want some extra money for a short amount of time. Alternatively you could apply for a credit card if you are wanting to buy a new household appliance and can pay it off with a bonus at the end of the year.
Have you checked your credit report? - Rejected credit applications will have a detrimental effect longterm to your credit score. So it is worth checking your credit report from a company like Experian where you will see whether you are likely to be accepted or not.
Can you afford the repayments? - Before taking out a loan sit down and work out whether or not you can afford the loan. Sounds pretty simple but you need to create a list of all your outgoings on a monthly basis, then consider whether you can find the extra money.
Have you found the best deal? - You must shop around to get yourself the very best deal, it not you will lose out!

What kinds of loans are available?

Alot will depend on the amount of money you wish to borrow and whether or not you are a homeowner. There are three different main kinds of loan available as you will see from the below table. All have different borrowing ranges and repayment periods;

Kind of Loan Borrowing Range Repayment Period
Personal loans (unsecured) Up to £25,000 Within 10 years
Secured loans £25,000 - £120,000 Within 25 years
Consolidation loans Agreed with agent Agreed with agent

Whilst these are the three main kinds of loan on the market there are alot of different types of loan that you can apply for. We have expanded upon these further in our "different types of loans" section.

Where can you get a loan in the UK?

There are a number of places you can apply for and get a loan nowadays, but do your research on them before committing;

- high street banks and building societies
- internet loan providers
- supermarkets and high street shops
- secured loan providers

Loans for young people

Normally a lender will require you to have a good credit history and be able to demonstrate that you are able to repay a loan they give you. Obviously this is alot harder for a young person as you often have neither of the above. There are however various options available to you such as a student loan which has a very low interest rate and is repayable when you start working. If you are however not a student there are a number of unsecured personal loans available from a variety of lenders. You need to shop around and ask your local high street banks if they can help you out. Try your best to get into employment as soon as possible and do what you can to improve your credit rating. Simple things like getting your name on the electoral roll will help you improve it.

Can I get a loan if I am unemployed?

Being unemployed is tough as cashflow is tight, but things are made even tougher in that lenders will be very unwilling to loan money to someone without a stable job and salary. So needing to take a small loan out in order to make ends meet will probably be difficult if you approach mainstream lenders. There are an increasing number of specialist providers of loans to the unemployed. Unfortunately you will not be able to apply for loans with the most attractive terms. Specialist loan providers will perceive you as high risk and the loan you will be offered will have a much higher interest rate. Your best plan would be to approach your bank and explain your situation, see if there is anything they can do to help. If not then do your best to improve your credit rating and approach some of these more specialist loan providers.

Can I get a loan if I have a bad credit history?

The simple answer to this question is; Yes you can ... however it is going to cost you. Like specialist loan providers for the unemployed, lenders will perceive you as high risk and the loan you will be offered will be at a high rate of interest. A bad credit history is basically when you have "black marks" on your file/report at one of the main credit reference agencies - CallCredit, Equifax and Experian. Your file/report will contain reports on your financial history including your mortgage, credit cards and any other loans. So if you have ever defaulted on a payment or been declared bancrupt then a lender will be able to see this. You need to do your utmost to improve your credit score and be open and honest with the lenders you are talking to.