Loan Types
The types of loan available depend on your financial circumstances.
The list below gives an overview of the most popular types but it's
not comprehensive and you might be better off considering other options
than a loan.
If you're in financial difficulties talk to citizen's
advice or a debt and money advice service before you commit
to any further borrowing!
Considering a homeowner or secured loan?
If you are a UK homeowner or are paying a mortgage you could consider
a secured loan.
Why opt for secured?
It can be easier to get a loan on a secured basis if you've had problems
in the past. These can be less of a problem with a secured loan. You're
not guaranteed to get a loan but lenders are often more likely to be
able to assist if the loan can be secured on property.
When you are looking for finance, it is advisable to compare the interest
payments you will be charged ( the APR - Annual Percentage Rate ) from
several lenders as this will help you to determine how competitive they
are.
In general, the more you borrow, the lower the interest rate will be.
But this shouldn't encourage you to borrow more than you need!
 If
you are offered a 'fixed' interest rate, it means your payments will
remain the same throughout the term of your secured loan, regardless
of any rises or falls in the bank's base interest rate.
Knowing your monthly payments are going to remain the same can help
with your budgeting.
If the secured loan has a 'variable' interest rate your monthly payments
may alter with any changes to the bank's base interest rate.
Ensure that before you take out any secured loan that you know what
your monthly payments will be, for how long , whether they are fixed
or variable and how much you will pay back in total.
Lenders can find what's right for your needs. Apart from competitive
APR's (annual percentage rate), some lenders also have options available
which can include:
- The option to overpay either regularly or as a lump sum. This
can substantially reduce both the term and the total amount you
repay.
- Payment holidays where you can take up to a three month break
from making your repayments
What is the difference between a secured and an unsecured loan?
When choosing the right finance you need to be aware of the differences
between the many options offered, and which will suit your circumstances
the best.
Do you need a large or small loan over a short or long repayment period?
Which loan suits a houseowner, or somebody with a bad credit history?
The choices become much easier when you know the differences.
Secured Loan
This is secured on your property by the lender. This means that the
lender has little risk of losing any money and so can offer a lower
APR (Annual Percentage Rate) than would be available with an unsecured
loan. In the case of a good credit history, our lenders can often
offer secured loans to a higher proportion of the equity available
in the property.
It can be easier to get a loan on a secured basis if you have an adverse
credit history. Past problems such as arrears or county court judgements
(ccj's) can be discounted to an extent.
In all cases with secured loans you should be aware that your home
is at risk if you do not keep up repayments on a mortgage or other loan
secured on it.
Unsecured Loan
An unsecured loan can cost more in repayments but does not carry as much risk
to your home as a secured loan. If you don't repay it, the lender can't
take your house off you without going through an extensive legal process
- putting a charge on the property. For this reason, it can be difficult
to get unsecured loans if you've had problems in the past with late
or missed repayments on loans or credit cards.
Tenant Loans
Unsecured Loan
The main loan option open to a tenant is an Unsecured/Personal Loan.
This is a loan which is not secured on property, unlike a Secured or
Homeowner loan.
An Unsecured loan allows you to borrow money without offering security
in return to the lender, but you are still liable to repay the loan.
Because of the risk to the lender, a Personal or Unsecured loan is generally
more expensive than a Secured loan and it can also be more difficult
to find if you've had problems with your credit record, or if you've
just started work.
Your loan application will be judged on your ability to repay the loan
- your earnings and bank and credit history will be important. However,
there are lenders who specialise in offering competitive rates to tenants
and those with a bad credit history.
On the positive side, an Unsecured Loan can be arranged with the minimum
of paperwork and can also be paid out much more quickly than a Secured
Loan, as there is no need to wait for a survey or valuation of property.
In some cases, it's possible to get the money paid out within a day
or two. The maximum Unsecured Loan is £25,000 with repayment terms
usually from 12 to 84 months.
If you're a non-homeowner - find an unsecured loan if you rent your
home (council, private or housing association) or live with your parents
Unsecured Loans
If you are a council or private Tenant, renting your house
or flat or living with parents you may have often found it difficult
to find an unsecured loan.
Non-homeowner loan
Find a fast response loan if you're:
- Renting from the council
- Renting from a housing association
- Renting from a private landlord
- Living in other accomodation
- Living with Parents
- Living in HM Forces accomodation
- Living in student accomodation
Click here to find out about a loan for
HM Forces now.
Easy to apply online
Interest rates - variable or fixed?
When you are looking for a loan, Secured or Unsecured, you should ensure
that you don't borrow more than you can comfortably afford to repay.
It is advisable to compare the interest payments you will be charged (the APR
- Annual Percentage Rate) from several lenders, as this will help you to decide
how competitive the loans they are offering are.
Generally, the larger the amount you borrow, the lower the interest
rate will be.
Ensuring your monthly payments remain the same can help with your budgeting,
so if the loan you are offered has a 'fixed' interest rate, it means
your payments will remain the same throughout the term of your loan,
regardless of any rises or falls in the bank's base interest rate.
If the loan has a 'variable' interest rate then your monthly payments
may alter with any changes to the bank's interest rate. This can be an
important factor at the moment, with the rising interest rates.
Before you take out any loan make sure that you know exactly what your
monthly payments will be, for how long, and whether they are fixed or
variable, and how much you will pay back in total.
Think carefully before you take on extra credit or consolidate your
loan - it may be tempting to borrow more, but you should always carefully
work out your budget before committing.
Ask yourself how you'd cope if your financial circumstances changed,
for example if you lost your job, had your overtime or bonus reduced
or became ill? Is there an alternative to a loan - can you reduce your
outgoings and/or increase your income?
How can you get your finances back on track?
Over Extended Credit
Unlike our grandparents' generation who were generally reluctant to
borrow, buying today instead of having to put it off until tomorrow has
become an accepted feature of our society. However, it is easy to become
financially over-extended with credit cards, mortgages, car
loans, overdrafts, unexpected bills and changes in personal circumstances
- illness, birth of a child, an accident, business failure
or unemployment.
A recent survey revealed it only takes a 10 % drop in income to change
what was a manageable credit commitment into a debt problem.
The key to all debt problems is prompt action, act now before things
get worse - it's tempting to ignore statements and letters regarding
your debt problem in the hope that they'll go away or 'something will
turn up' but early action can make any problem much easier to resolve.
 Signs
that you may need debt help
- Mortgage arrears, Credit card debts or utility bill 'final demands'
- Debt collectors or bailiffs calling
- Missed loan repayments
- County Court judgements or defaults
- Creditors phoning
- Afraid to open the post or answer the phone
- You are overdrawn every month
- You only repay the minimum amount on your credit card every month
- The amount you owe on your credit card rises every month
- You put off paying bills until the final reminder
- You have missed one or more mortgage, loan or card repayments
Prioritising your debts is the first step.
Priority debts
Priority debts are those that require the most urgent attention - non
payment can result in you losing your home or essential services :
mortgage, secured loans, rent arrears, heating bills, telephone and car (if
essential for work), court fines, income tax, council tax, maintenance payments.
Mortgage Arrears - not making your mortgage payments
puts your home at risk. The mortgage provider will contact you, usually
by phone and then in writing, to warn you of the consequences of non
payment. They will then refer the case to lawyers and eventually issue
a court summons. The longer you leave it the more the arrears and the
problem builds. If you decide to consolidate the arrears can be incorporated
into the loan and make your monthly repayments more affordable.
Council Tax Arrears - if you don't pay your council
tax, the council will apply for a 'liability order' in the courts. They
can then use bailiffs to get the money from you. This can be by removing
items of value from you, or by deducting money from your wages or benefits.
If you are on a low income or unemployed you may be entitled to council tax
benefit - check with your local Benefits Agency. The Child Support Agency can
also authorise your employer to make direct deductions from your wages, or
apply for a liability order.
If you don't act quickly some creditors are able by law to:
Repossess your home or business premises, or evict you from rental properties
Cut off electricity, gas or water supplies to your home or business
Instruct bailiffs to remove goods, vehicles or equipment from your home or
business
Ask the magistrates to sentence you to prison - the courts are unlikely to
sentence you to a prison term if you have not paid because you don't have enough
money. Imprisonment can result from non payment of court fines, council tax
or maintenance. You cannot be sent to prison without a hearing.
County Court Judgements
Court action can lead to a CCJ being registered against you. This will
go on file and subsequently affect your credit rating. Bailiffs can be
used to enforce payment of CCJs.
Non-priority debts
Non-priority debts include:
bank overdrafts, credit-card arrears, catalogue
debt, store cards, non-essential hire-purchase.
Work out your budget
Calculate how much money is available to you each month - all income
from you and your spouse, any contributions from any adult living with
you, benefits, overtime ( if regular)
Now list your monthly spending.
The figures become much clearer if you group them under different headings
-
Finance : mortgage payments, secured loans,
Household expenses :council tax, electricity, gas, water rates, TV license
Living expenses : food, toiletries, cleaning materials, etc
Clothing
Travelling expenses : car, train fares etc
Children :school dinners, clubs etc
If your monthly outgoings exceed your monthly income you need to act
as soon as possible to regain balance of your finances. Basically, you
need to either decrease your spending or increase your earnings. The
essential bills need to be your priority.
Stop and think!
Before you consider taking out a loan, it's always worth pausing for
a review of the situation - A loan may not be the best way forward.
You could consider a number of options such as an informal arrangement
with your creditors or an IVA. If you are unsure of your options, talk
to citizen's advice or one of the many debt help charities who will be
able to give you more information on alternatives to borrowing.
What is a Debt Consolidation Loan?
A Debt Consolidation Loan is a single loan that can be used to pay off
existing debts - personal loans, credit cards, overdrafts,student loans
or unpaid bills. Credit cards and store cards have high-interest rates
which can mean heavy payments every month. A debt consolidation loan
can relieve your financial pressure and enable you to maintain and rebuild
your credit rating. Refinancing by incorporating all your debts into one loan - a Debt
Consolidation Loan - can reduce your monthly payments and enable
you to take control of your finances. Mortgage or loan arrears can
then be cleared when you consolidate with more affordable monthly payments
- clearing unpaid debts, avoiding court action and preserving your
credit status.
You need to be sure that the interest rate and the repayment term that you
agree to are manageable.
You should also make sure that you review your income/spending pattern
so that you don't run into the same problem in the future!
Reduce monthly payments
It can be possible to significantly reduce your monthly payments with
a Debt Consolidation Loan, sometimes by up to half. Making one monthly
payment can be much more convenient and easier to manage than making
multiple payments.
The downside is that the consolidation loan will usually run for
longer and end up costing you more in interest.
Also you should
think long and hard before switching unsecured debt to secured - if
you're uncertain then make sure you take advice from an independent
source such as one of the debt charities or the citizen's advice bureau. The phrase ' YOUR HOME MAY BE REPOSSESSED IF YOU
DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED
ON IT.' isn't there for decoration - you really can
lose your home if you don't meet your repayment obligations!
Turned down for a loan?
Find out about Debt Management
Debt Help and Advice
The key to solving a debt problem is prompt action - act today before
the situation gets worse. Don't ignore creditors and threatening letter
or final demands hoping they'll go away - they won't - unless you do
something about it!
Turned down for a loan
If you have applied for a Debt
Consolidation loan, but have been turned down due to adverse credit
or insufficient income, and you have a disposable income of £100
-125 per month and a total of unsecured debt of £5k, then a professional
Debt Management plan could be a way for you to sort out your debts.
Outstanding debts such as credit cards, store cards, catalogues, personal
loans, overdrafts, repossessed property debt, mobile phones (in some
cases) and Hire Purchase (in some cases) can be settled under a Debt
Management plan, before your financial situation gets out of control.
What is Debt Management?
Rather than dealing with all your creditors yourself, a debt management
company does this for you. They talk to your creditors and try to get
the amount you owe reduced and interest frozen. You make one monthly
payment to the debt management company and they arrange for your creditors
to get a share.
Most creditors go along with this as it shows that you are serious about
dealing with your debt problem. They will often accept a partial repayment
as it means that they don't have the extra expense of collection or legal
proceedings with the risk of getting nothing at the end.
Many people appreciate the peace of mind that debt management brings
as the threatening letters and phone calls from creditors soon come to
an end!
Don't forget though, that a debt management company will charge
a fee to help you. If you're unhappy with the idea of this, there is
no reason that you can't negotiate with creditors yourself - contact
your citizen's advice bureau for more information on this option.
IVA's
The Individual Voluntary Arrangement, otherwise known as IVA, is basically
an alternative to bankruptcy and is governed by the Insolvency Act of
1986.
With an IVA you make a reduced payment each month to your creditors
for a reasonable period of time, generally up to a maximum of 60 months.
In some cases, you can pay a one-off lump sum - this is called a Full
and Final Settlement IVA. This is a legally binding arrangement with
your creditors which enables you to repay a proportion of your debt in
a one off lump sum payment.
An IVA is often preferable to bankruptcy by your creditors because the
fees involved in bankruptcy petitions can be high, leaving little left
to settle any outstanding debts.
An IVA is only possible if you can afford to make regular repayments
to your creditors for a fixed period of time. You generally need a disposable
income of £250+ per month and owe more than £15,000.
We can connect you to professional debt managers who will carefully
assess your personal financial situation, and undertake all the creditor
negotiations on your behalf. They will then prepare a proposal for your
creditors and seek approval for your IVA.
Once your IVA has been approved you are legally protected from your
creditors taking further action against you for recovery of the debt,
or adding further interest or charges to your accounts. Your repayments
are the same every month - there will be no added interest surprises.
When you have made your final payment all remaining debt is then legally
cancelled, including any remaining debts which were included within the
arrangement by your creditors. Most importantly your professional status
will not suffer, as the agreements are made privately with your creditors,
unlike bankruptcy.
IVA Advantages
- Creditors' demands stop
- Single affordable monthly payment assessed according to your personal
situation repays your debts
- Protection from further court action by creditors
- With your creditors' agreement you can sometimes write off a proportion
of your debt
- You can be debt free in 5 years
- Your credit rating may be repaired at the end of the arrangement
Payday Loans
Payday loans are a relatively recent phenomena in the uk and have become
a popular way of dealing with short-term cash flow problems. The borrower
can obtain up to £750-1000 for a short period of time, generally
a couple of weeks or a month until the next payday - hence the name.
Interest is usually charged in the form of a flat rate payment which
can be collected with the initial amount borrowed.
The big downside with a payday loan is that
although the charges can appear reasonable in the first instance,
they often equate to thousands of percent a year when viewed as an
APR.
If you can't repay the initial amount on time, the loan can sometimes
be 'rolled over' or deferred but this comes at an extra cost so make
sure you understand what your options are at this stage. Don't take out
a payday loan if you have any doubt that you'll be able to repay it.
Payday loans can be fine if you just use them as a 'one-off' for an emergency
but they can work out to be a very expensive way of borrowing if you
keep using them.
These concerns and others have been highlighted in a recent report from
the OFT which found that there were problems in the way that payday loans
were marketed and operated. The firms involved were given 12 weeks as
of March 2013 to take corrective action.
More
on payday loan issues (BBC Website - opens in new window)
If you find you have to keep borrowing money whether from a payday loan
company or other lender, you need to address the underlying issues and
either cut your expenditure or try
and earn extra money or preferably do
both!
We don't provide payday loans ourselves or act as an introducer for
any payday loan company but this page may feature externally created
advertisements, the content of which is beyond our control and which
should not be taken as being recommended or endorsed by us. In particular,
you should consider whether a payday loan is suitable for your needs:
Payday loans are not for everyone
and they are not a long term solution to debt problems.
They are meant to be used as a short term 'emergency' solution if
you can't raise cash elsewhere.
You should consider options
other than a payday loan if you think you may have difficulty repaying
on the due date or you might need a loan for more than a few weeks.
Can I get a Payday Loan?
If you aged are over 18 and earning more than £750 a month in
full-time employment you may qualify. All you then need is a bank account
with a debit card for you to repay your payday loan.
The lender will need the following information as a minimum when you
apply for a payday loan:
name and address
date of birth
contact telephone numbers and email
work and payroll details
The key to solving a debt problem is prompt action - act now before
the situation gets worse. We suggest you take advice if you are experiencing
problems - contact one of the many debt charities which can help or
talk to your local citizen's advice bureau.
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