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Types of personal loans

Types of personal loans

Introduction
This article explains the different types of personal loans available, in brief mind, as there are so many. If you are looking for information on home loans, otherwise called mortgages. you can read our article here

Personal loans come in two forms:
Secured; Unsecured.

Secured Personal Loans
A secured loan is tied to something you own of value. For example, a mortgage is a type of secured loan (although we shall not discuss mortgages here). This enables lenders to offer a higher loan amount often at lower interest rates simple because there is more certainty for them, that they will be repaid. Examples where the loan is secured are loans for, for example, vehicles, further study or other large expenses.

Unsecured Personal Loans
An unsecured personal loan, does not something you own as collateral. An unsecured loan is best suited to people who do not own their own property, such as council or private tenants or people living with parents, although they are also available to homeowners. Even if you have a bad credit rating or poor credit history, you could still be approved for an unsecured loan. Of course to ensure the lender gets their money back, the rates are often higher with unsecured loans and the APR is usually fixed.

Types of secured personal loans
We shall now discuss a number of types of secured personal loans, in turn:
Vehicle loans If you own a car you may be able to secure the loan against it. This can be a good way of raising money quickly, as many of the criteria for lending you money can be relaxed. Types of unsecured personal loans We shall now discuss a number of types of unsecured personal loans, in turn. Unsecured loans may appear in many different forms depending on your unsecured loan requirements: Debt consolidation loans it is a loan that is used to pay off other existing debts, resulting in just one monthly payment. This type of loan is commonly used to combine unsecured debt, making it easier to manage your overall budget and stick to a repayment plan. Bad credit loans If you have a bad credit history you have probably found it’s hard to get a loan. Whether it’s for a home, a car, or a personal unsecured loan, people with bad credit typically have a harder time finding a lender and end up paying higher interest rates. Payday loans A payday loan, also know as a cash advance or paycheque advance, is a small (typically between around £80 and £100, depending on your salary), short term loan which is intended to bridge the gap between wages and cover unexpected expenses. Business loans Business loans are commonly used by business owners to access cash needed for business start up, growth or improvement. There are a wide variety of programs and lenders available, so it’s important to understand your specific needs and pursue a loan that fits your situation. Graduate loans Graduate loans are an increasingly common form of unsecured personal loans that allow new graduates to consolidate debt. For many people this is an attractive way to firm up their finances when making that first foray into the world of working full time. Career development loans Career development loans are a popular way to fund vocational education and training. They are available to a wide variety of people from a broad range of educational and employment backgrounds. Overdraft facilities A great number of bank accounts include some form of overdraft facility. The purpose is to allow the account holder to access funds beyond what they hold in the account, up to a specified limit.

The loan agreement
When you enter into a loan agreement you are signing a contract to make the repayments, as stipulated, by the arranged date every month for the duration of the contract. Any deviation from this agreement, without prior agreement, may result in financial penalties. For example, some lenders apply a charge for early settlement (also known as an early redemption penalty) if you repay the loan in full before the agreed end date. This penalty can be up to 2 or 3 months interest.

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