Types of Loans – Which is Best for you?

At one time or another, most of us will find ourselves in a situation where we need to buy something but can’t afford the item in question, or would rather spread the costs.

Maybe it’s a new car to get you to and from work or a new computer to help you keep on top of bill payments, banking and so on. Perhaps your washing machine has broken or you need a much-deserved holiday. When such a situation occurs, it is often the case that we will opt to take out one type of loan or another. There are many different ways to do this. What type of loan would suit you best?

An Informal Loan

For most of us, borrowing from a family member or close friend, if possible, would come high on the list of potential options. As long as an agreement is written down that suits both parties, this is an informal, cheap and effective way to borrow money.

Personal Loans

If you have a steady income, then a personal loan from a bank or other financial institution may be the way ahead. Personal loans are usually taken out over one to five years and come with relatively low rates of interest. This means that you get the money you need and can pay it back little by little for a small fee.

Guarantor Loans

If you can’t prove that you have a steady income, for example if you have recently started a new job, or if you have a poor credit rating, then a guarantor loan is an option well worth considering. Guarantor loan experts can offer you a loan of up to £7,500, all you need to be able to do is get someone to act as your guarantor. This means they vouch for your ability to pay back the loan and are legally obliged to take over your repayments if you should find yourself unable to do so.

Credit Cards

Credit cards are a sound way to borrow money, many now offer 0% for up to 27 months and so if you can quickly pay back the money you borrow, they are a good option. Beware, however, because once the 0% interest period is over, then the interest rates jump up and can be very high. If you don’t pay back the money you borrowed quickly enough you could be in debt for a long time.

Payday Loans

Payday loans offer short-term loans on relatively small amounts of money and the idea is that you pay back the loan in full at the end of the month, on pay day. These loans carry very high interest rates and are a very poor option. Many people get themselves into spiralling debt as a result of taking out a payday loan with the very best of intentions.

Taking out a loan for an essential item or for a special treat is generally a simple process and most people appreciate the convenience, but before signing your name on the dotted line make sure you are confident that you have selected the best option for you and that repaying the loan isn’t going to leave you in the doldrums.

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