Individuals plan for the big event early and save for it accordingly. But at times, it becomes impossible to save. In this situation, loans help bridge the gap without postponing critical life events to an anonymous date.
However, before choosing the loan, one has to be mindful of the purpose he is borrowing for.
There are different loans for different situations. The blog states different loans and their purposes.
How To Choose the Right Loan for Your Purpose?
If you are confused about which loan offer to go for in your situation, then read ahead.
1) Personal Loans
As the name suggests, personal loans can be used for multiple purposes.
Here are the primary purposes one can take a personal loan for.
- Planning a vacation
- Debt consolidation
- Planning a wedding
- Home renovation
It is a type of instalment credit where an individual can borrow an amount and pay it off in instalments as per the agreement. These have short- and long-term repayment options. Personal loans have 2 types- secured and unsecured personal loans.
Secured loans require collateral, and an unsecured personal loan is granted to the credible borrower. A credit score is the primary qualification criteria for unsecured loans. You can borrow personal loans for up to £25000 for your needs.
2) Bad credit loans
There are distinct offerings for bad credit borrowers. It is designed specifically for those who cannot secure a loan from traditional lenders. One might need credit regardless of the credit score. So, if you have less-than-perfect credit, you may qualify for long term loans for bad credit UK no guarantor direct lender. These loans help meet any purpose.
- Loans for self-employed
If you work as a freelancer and need monetary assistance, self-employed loans for freelancers in the UK would be the ideal choice. It is because it is for a specific group. To get the loan approved, one needs to prove a reliable and steady income source. It acts as repayment credibility of the person on loan.
4) Student loans
As mentioned above, every loan is designed to meet a specific purpose. Student loans help students rationalize their higher-education dreams without any obstacles. These loans typically help meet important expenses like tuition fees, book fees, and hostel living expenses.
Student loans can be broadly classified into two types, namely:
- Federal student loans and private student loans.
|Federal student loans||Private Student loans|
|The government provides federal student loans||while private student loans are provided by banks and financial institutions, like direct lenders|
|Federal loans have a relatively low-interest rate than private||One may get private student loans at competitive interest rates depending on the circumstances|
|Flexible repayment option||Repayment terms vary from lender to lender|
|There is no pre-payment fee||The loan policies differ according to different lenders. Ensure there are no pre-payment fees on the loan|
|If you work in public service, you may be waived a part of the loan||Private student loan lenders do not offer loan forgiveness programs, but in certain situations, a part loan could be waived|
Private student loan providers aim to make borrowing hassle-free for borrowers. Hence, direct lenders no credit check no guarantor to individuals. You can qualify for good interest rates with private student loans.
5) Car loans
Car loans are loans provided directly by the lender. Here, the lender deals directly with the borrower, unlike car finance. In-car finance, the individual secures a car through a dealership.
However, one cannot own a car in car finance from the beginning but after paying the complete payment. One cannot modify the car in car finance but can do so in a car loan. In this, the collateral for the loan is the vehicle itself.
6) Mortgage Loans
Are you looking forward to a home purchase? You can consider mortgage loans. It is a secured loan. One takes it to buy another property or use the funds received against the property for some other use. With a secured loan, the borrower promises to make repayments, and if one fails to do so, the lender shares all the rights to the property.
There is a vast difference between a mortgage and a home loan. Many individuals use these terms interchangeably. These are entirely different terms.
A mortgage loan is known as a loan against property. It is the property that the applicant already owns. You do not need to sell off the ownership of the property to get the loan to get the mortgage.
7) Credit Builder loans
Credit builder loans are loans specially designed to improve credit scores. It is ideal for people with bad credit and no credit. If you are the one seeking long-term loans for bad credit in the UK with no guarantor from a direct lender and not getting one. You will probably like credit builder loans.
You do not require to have a reputable credit score to qualify for the loan. One can qualify with bad or no credit at all for the loan. These loans are provided by community banks and institutions, and online lenders. These loans work like savings accounts. Instead of borrowing funds, you make a fixed monthly payment each month and receive the whole amount at the end of the loan tenure.
The purpose is- to discipline usage of finances boosting the credit score. Once deposited, one cannot withdraw the funds before time. If you do not take unnecessary credit, your credit will improve. It is the safest and most affordable way to build credit. You can put your credit on autopay. Then, you never have to keep a tab over making payments.
8) Instant Cash loans
Instant cash loans are short-term loans taken to meet an immediate purpose. Whether you need to get the broken pipe fixed immediately or get the car windowpane repaired, you can borrow instant cash for short-term needs. In this, you can borrow up to £2500.
Anyone can borrow these loans to bridge an urgent requirement. Instant cash loans have minimum qualification requirements. You need to reveal credible income proof to secure the loan. Self-employed individuals, apart from Self employed loans for freelancers in UK, can seek instant cash loans for unavoidable expenses.
9) Small Business Loans
There are multiple types of small business loans like- equipment financing, invoice financing, working capital loan, etc. Small business loans help a company with 50-employees in funding their business operations.
Local businesses can apply for these loans if they need immediate assistance regarding hiring, buying equipment or funding business travel. The loans are secured by collateral. The collateral can be an asset to the business. Businesses receive money upfront from lenders. The borrower repays the loan according to the loan agreement term. In this, a business can borrow up to £500k.
If your credit score is strong, you may qualify for an unsecured business loan. Unsecured loans are short term loans. The businesses can secure the credit without staking collateral here. However, these loans offer high-interest terms. One can borrow a comparatively low amount compared to secured loans.
10) Debt consolidation loans
Debt consolidation loans are loans for consolidating debts into a single payment. If the borrower finds it hard to manage debts, he can consolidate them into one. Instead of dealing with multiple lenders, he will deal with only a single lender.
So, if you have multiple loans lined-up like self-employed loans, personal loans, secured loans, car finance, etc., you can consolidate them all. Apart from ease of payment, it will help you reduce overall interest on the loan.
These are some important loan types that you can consider for your condition. If you share requirements for any of the above-mentioned loans, contact us.