Obtaining a loan is a great way to afford something special or pay an expense that was not expected. Loans are especially helpful when people are in need of £1,000 or more.
What Is A Loan?
A loan is a set amount of cash that you can borrow from financial institutions. You are allowed to pay the amount back over time, but you will be required to pay interest.
There are various kinds of loans, but they typically fall into one of two categories, secured and unsecured. When obtaining a secured loan, you must offer an asset as collateral and this item is sold if you are unable to pay the loan back as promised. See here to learn about bridging loans.
How Do Loans Work?
To apply for a loan, you have to be a lender or broker. This can be done by phone, post, on the Internet, or by heading into a local bank.
Once your application has been approved, the funds will be wired into your bank account.
You will then be required to make payments, typically monthly, until you have paid it off in full.
If a payment is missed, you will be required to pay a fee and extra interest will be added to the balance. The amount you missed will be added to the following month, which means your next payment will be twice as much.
What Can A Loan Be Used For?
While you can obtain a loan to buy nearly anything, there are some that are designated for certain purposes, like buying a vehicle.
A home mortgage is a secured loan that is used to purchase the property. If you are unable to pay this back as promised, your property will be repossessed.
The Pros And Cons Of Getting A Loan
- A solid option for long-term borrowing
- In many cases, the interest rate is fixed
- You are allowed to borrow as much as £50,000
- Money can be in your hand is as little as 48 hours
- There are fees associated with paying back the funds early
- Your assets may have to be used as collateral
- Payment terms aretypically inflexible
- In order to get favorable rates, you have to have a high credit rating
How Long Will You Be Given To Repay A Loan?
When you apply for a loan, you are usually asked about how long you will need to pay it back. With unsecured loans, you are typically given 1-7 years, but it can be as much as 10 years.
The more time it takes for you to pay back your loan, the more it will cost you overall because of interest but your monthly payments are likely to be quite reasonable. It is crucial that you find a way to minimize the interest that you pay while making sure that you can afford to make payments monthly.
How Much Can You Borrow?
You can borrow from £1,000-£25,000 with most loan types.
If you have a small loan, it will typically take you 1-3 years to pay it back.
The larger loans can be paid back in as little as one year, but secured loans are generally 3-35 years.
Where Can You Receive A Loan From?
There are numerous companies that offer loans in the UK, including:
- Banking institutions
- The Government
- Charitable Organizations
- Peer-to-peer lenders
- Credit Unions
- Grocery Stores
- Specialty Lenders
- The Postal Service