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A Quick Guide To Loans

So you've decided you need a loan, and off you go to your bank manager or broker to arrange it. It's pretty straightforward…isn't it? Well, it seems so until you hear all the different types of loans that are available to you. What do they all mean? What exactly do they offer? Here's a quick guide to help you.

Secured Loan

A secured loan is one where you will have to pledge an asset - usually your home - as security to ensure the payments of the loan. The length of the loan, the sum you can borrow and the Annual Percentage Rate (APR) of the loan will be calculated on the value of your property, your ability to pay back the loan and your individual circumstances.

Before you take out a secured loan you need to be sure you can make the payments, as a failure to do so could mean you'd be at risk of losing your home.

Mortgage

A mortgage is a type of loan usually provided by the lender so you can buy a home.

Mortgages are long term loans secured against the property you buy. There are many different types available, flexible mortgages, interest only mortgages and repayment mortgages.

You should discuss with a broker which mortgage is the right one for you to choose.

Re-Mortgage

Re-mortgaging is simply switching your current mortgage to a new one, normally you would change lenders when you did this. Advantages of re-mortgaging include lowering your monthly outgoings by securing a lower interest rate, or by increasing the term of your mortgage.

Personal Loan

A personal loan is a way of borrowing money from a lender that can be secured or unsecured depending on your preference. Personal loans are normally used for home improvements, holidays or luxury items. This type of loan is widely available and interest rates on offer vary. With this type of loan it is sensible to shop around to see the best offers available.

Equity Release Scheme

Equity release schemes are where the lenders let you have part of the value of your property in return for a share of the proceeds when you die. You need to be at least 55 years of age to take advantage of these schemes and the value of your property must be more than £40,000 pounds. Lenders usually offer a lump sum or a regular income.