Types of Loans
Types of Loans
When it comes to borrowing money there are a lot of banks, lenders and credit union who can help you. The need for a loan can be due to any unexpected or expected situation. However, for both the situations there are a lot of different types of loans available. Choosing which loan to borrow for a particular situation can be hard at times.
Below is the guide which will help you to differentiate between different types of loans, and which loan would be more feasible for you in a particular situation.
What are the different types of loans?
There are basically two main types of loans which is further subdivided into different forms.
First one is Secured Loans, these loans are usually borrowed against an asset such as a car, your house or jewellery of any kind.
The second one is Unsecured Loans, these loans do not require any asset to borrow money. They are provided to you on the basis of your credit history.
Unsecured Loans
Unsecured loans are not provided against any asset. They don’t have any restrictions like the secured loans and can be used for almost any purpose. Unsecured loans come in different forms such as:
- Personal unsecured loans
- Bad credit loans
- Small payday loans
- Small personal loans
- Social loans
- No Guarantor Loans
- Budgeting Loans
Secured Loans
Secured loans are loans that you can borrow against an asset. They come in different forms such as:
- Secured Personal Loans
- Bridging Loans
- Car Finance
- Debt Consolidation Loans
- Homeowner Loans
- Logbook Loans
Secured loans have a restriction of use when it comes borrowing. For example, if you borrow a car finance, you have to use that money for the car only. Same goes for bridging loans, they should be used for buying a house or a property nothing else.
The loan term and amount that you can borrow in secured loans
The below-listed table shows the term for which you can borrow a specific amount of money from secured loans
| Type of Secured Loan | Amount You Can Borrow | Loan Term |
|
£500 – £25,000 |
1-5 years |
|
|
Bridging Loans |
£10,000 – £25 million |
No set time period |
|
Car Finance |
Car’s Value |
1-5 years |
|
Debt Consolidation Loans |
£10,000 – £2.5 million |
2-30 years |
|
Homeowner Loans |
£1,000 – £500,000 |
2-20 years |
|
Logbook Loans |
£1,000 – £150,000 |
6 months to 5 years |
The APR for secured loans is low as compared to unsecured loans as you are providing an asset as a collateral. However, if you miss your repayments for several months, the lenders can seize your asset and sell it to recover their money.
The loan term and amount that you can borrow in unsecured loans
The below-listed table shows the term for which you can borrow a specific amount of money for unsecured loans
|
Type of Unsecured Loan |
Amount You Can Borrow |
Loan Term |
|
Personal unsecured loans |
£500 – £5,000 |
1 – 12 months |
|
Bad credit loans |
£50- £3,000 |
1 – 24 months |
|
Small payday loans |
£50- £2,000 |
1 month, can be extended |
|
Small personal loans |
£50- £3,000 |
1 – 12 months |
|
Social loans |
£1,000 – £25,000 |
6 months to 5 years |
|
No Guarantor loans |
£50- £3,000 |
1 – 12 months |
As you can see the amount that you can borrow with an unsecured loan is not as high as secured loans. This is because of the risk the lender is taking by giving out a loan to you for bad credit. The APR charged for these loans are high and can go up to 400% in some cases.
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