Taking out a loan can be a confusing business. There are a huge amount of loan products out there, so deciding on the right loan for you can take some time. When deciding on any loan, the general rule of thumb is to always look at the terms. The APR rate, repayment time, monthly payment instalments, interest rates and hidden charges all need to be taken into account.
Types of Loan
Commonly termed as unsecured loans for short term borrowing, the amount you borrow, and how much you pay, will all depend on your credit rating. The better your rating, the less you will pay in interest.
Peer-to-peer Loans (Also known as P2P)
This type of loan is growing in popularity as high street banks continue to offer poor interest rates to both savers and borrowers. Connecting people who want to lend, with those who need a loan, peer-to-peer lending has revolutionised the lending industry, and is now hotly tipped to replace traditional high street banking. Offering far more competitive terms than banks, peer-to-peer lending is a far simpler and more cost effective way to take out a short term loan.
Having a friend or family member act as a guarantor offers security to a lender by agreeing to take over payments if a default is made. A guarantor loan allows applicants with a bad credit score to borrow and rebuild credit.
Although available to those with bed credit, payday loan companies often charge excessively high interest rates, and can lead to spiralling debt.