We all come to a point in our lives when we're in need of some financial help. No matter how well you prepare for the future, unfortunate surprises happen, and whether you need some quick money for an emergency or a larger amount for a big purchase, there are numerous finance options that you can choose. Here is a comparison, so that you can pick the best option for your financial needs!
Unsecured Loans
First, we've got unsecured loans. The fact that they're unsecured means that you do not need to provide collateral in order to secure the loan and be eligible. Instead, this sort of loan will usually require a credit check, with a few exceptions. You can use an eligibility calculator like the one from Money Saving Expert to see if you qualify for your loan.
- Personal loans
The most common type of loan, personal loans can be found pretty much anywhere on the high-street or online. The way they work is simple enough - you apply for a loan, a credit check is performed, and depending on how good your credit is, you get a higher or a lower amount. You repay it in multiple instalments, with added interest.
- Quick loans/same day loans
Same day loans are still a type of personal loan, but the focus is on getting through the process as quickly as possible. They are meant for emergencies and otherwise situations where you can't afford to wait for a normal borrowing process. The money can be in your account on the same day. The interest rate is quite high.
Payday loans are (usually small) loans you get until payday, so for a month or a fortnight. The interest rate is very high, so they should be used as a last resort. You can learn about alternatives from the Money Advice Service.
- Loans for bad credit/no credit check
Loans for bad credit or with no credit check are meant for people who do not benefit from an excellent credit rating. This type of loan enables anyone to be approved for financing, regardless of their score. Be aware that the interest rate is high, though. That is because the lender needs to secure themselves against a possible default.
- Peer to peer finance
Peer to peer finance is an alternative, non-traditional type of finance. Instead of getting the loan from a bank or high-street lender, you get it from a peer. These loans operate on a special platform dedicated to bringing together borrowers and lenders.
- Credit cards
Credit cards are incredibly convenient, because they allow you to have money at your disposal at any time and in any place. You only need to get approved once for a credit card and then spend within your limit. The dangers of this is that if you can't pay off the balance, you incur massive interest charges.
- Family loans
Of course, borrowing from friends and family is always an option. This type of borrowing usually doesn't require a credit check, collateral, or anything like that. You might even get away with no interest to pay! The risk is that it can affect your relationship.
Secured Loans
As for secured loans, as the name suggests, these are the ones that require collateral in order to act as security for the loan. This means that you can get a higher amount, and that your credit doesn't need to be great. However, you do run the risk of losing the asset if you fail to repay the loan.
- Mortgages
Mortgages are extremely common loans to get. Essentially, you put your house up as collateral in order to secure a large amount of money that you get as a loan. Usually, these loans are long-term, and you repay them over several decades. Because it's a secured loan, the interest rate is lower.
- Logbook loans
Logbook loans work a lot like mortgages do, except instead of putting a house up as collateral, you use your logbook as security. You still get to use your car normally, and you get your papers back as soon as you finish repaying your loan.
All in all, if you are in need of financing, there are numerous options for you. It all depends on what your needs and preferences are. If credit is not a problem for you, but you don't have assets to use as collateral, then an unsecured loan is the right pick for you, whether it's a payday loan, quick loan, or just a family loan. If, however, your score isn't ideal, but you have a car or a house to use as security, then perhaps a secured loan is better for your specific needs.