Loans – What Are The Options?
Once over loans were only used for certain things, however in recent years they have become much more widely available and are used for a wide range of purposes. There are many different loan options available to choose from and the type you can apply for will depend on things such as your credit history, loan requirements and overall affordability. All lenders will have a set lending criteria and no two lenders are the same and one element might be more important than others when they make their decision.
A lot of people believe loans are purely given off the score your report says, however this isn’t true. Many lenders will look at other things such as what is actually on your credit report, what your current credit debt is, your repayment history and your overall affordability. Before any loan is given, a lender will need to decide whether they believe it is affordable for you. Keep reading below to find out more about the different types of loans available.
Different Types of Loans
Home Collected / Doorstep Loans
One of the oldest types of loan is what is known as a doorstep loan or home collected loan. These types of loans date back years and offer a much more personal approach to lending and most companies will generally only deal with clients in their local area. The original doorstep loan was always dealt with in person, however as time has moved on repayments can now be paid in office, in person, over the phone or online.
- The amount you can lend from doorstep lenders might increase, once you prove you are responsible with your repayments.
- Most loans won’t exceed £1000 or a period of a year.
- Lenders tend to only work within a specific area.
Short Term Loans
Short term loans are regularly used by people to help account for unexpected expenses or to provide short term cash flow. Loans usually only don’t exceed £1000 and are typically a maximum of 12 months. Most short term loans can be applied for from banks, mainstream lenders and independent loan companies.
- APR can be higher to account for short lending times.
- Loans typically range between £100 and £1000.
- Loans are only available over short lengths of time.
One of the most common and known types of loan is a bank loan. These can be applied for with any bank, not just the bank you bank with. Bank loans can range anywhere from £1000 to £100,000, depending on earnings and credit score and repayments. The APR on bank loans is typically the lowest in the industry, however they do also have the strictest lending criterias as well.
- Bank loans have much stricter lending criterias and the amounts can typically be upto £25,000 on average, although they can be higher.
- Most banks will offer some form of unsecured and secured loan.
- Bank loans will have the biggest negative impact if payments are missed or a loan is defaulted.
Once payday loans were huge and they certainly saw a boom, however due to irresponsible lending complaints, many payday loan companies have gone by the wayside. However, there are still some companies offering them under stricter and more regulated terms. Most payday loans are available for periods covering anywhere from 3 days to 90 days and the amounts tend to be much smaller.
- The amount you can borrow will typically vary based on the timeframe and your actual earnings.
- Periods of lending are much shorter, which means repayments can be higher.
- Many payday loan companies use CPA (Continuous Payment Authority) to ensure repayments are made, this means even if you cancel a bank card, direct debit or standing order, the payment will still be taken.