Loans

A loan is an agreement where a lender gives you money and you pay them back the amount borrowed usually plus interest over a set period.

The interest is worked out as a percentage of the amount you borrow.

The longer you take to pay the loan back, the more interest you’ll be charged.

With a secured loan, you use an asset – such as your car or home – as collateral. If you don’t make your repayments, the lender can seize the asset used as security.

An unsecured loan doesn’t require an asset to be used as collateral.

A personal loan is another name for an unsecured loan. That means it isn’t secured against an asset such as your car or home. They’re available from banks, building societies and other lenders.

Credit unions are not-for-profit organisations that offer loans to their members.

Credit unions tend to look at your overall financial situation, not just your credit score. This means you might be able to get a loan even if you’ve been turned down by a bank or building society.

Some credit unions can get the money to you on the same day.

Find out everything you need to know about credit union loans.

Guarantor loans allow you to borrow money with the help of a family member or friend.

The guarantor agrees to pay the loan if you can't, which might improve your chances of being approved.

It’s important to be sure you can manage the repayments to avoid landing your family member or friend with your debt.

Payday loans are short-term loans with extremely high interest rates.

While they might seem like a quick fix, payday loans can lead to a cycle of debt if not handled extremely carefully.

Home credit, or doorstep loans, get their name from the fact the lender usually sends a representative to collect repayments from you in person.

This type of borrowing tends to be very expensive and is generally best avoided if possible. 

Loan sharks are illegal lenders who charge extremely high interest rates often trapping people in debt. They are notorious for using threatening behaviour to get people to pay up.

Sometimes a loan shark may pose as a friend to start with and you might not know who you’re dealing with until it’s too late.

Find out everything you need to know about loan sharks, including what to do if you’ve borrowed money from an illegal lender.

Student loans are designed to help cover the costs of higher education.

You won’t need to repay your loans until you’ve finished your course and you’re earning a certain amount of money.

A debt consolidation loan is a lump sum used to pay off other debts so that you only have to make one monthly payment.
 
If you’ve got money problems, borrowing more may not be the best way forward.

Find out more about debt consolidation.

If you’ve already got money worries, a loan may make your situation worse. Depending on your situation, it may be worth trying other routes first.

If you’re struggling because you’re waiting for your first universal credit payment, you could look into getting an advance.

It’s also a good idea to make sure you’re not missing out on any financial support you’re entitled to before turning to credit.

And we’ve got plenty of tips on other ways to increase your income on our Money Booster page.