Written by Michael Foote, Insurance and Finance ExpertMichael Foote is the founder of Quote Goat and has over 13 years experience working in the finance, insurance and currency sectors. Since launching Quote Goat he has appeared on TV as well as many of the largest online publications including Forbes, The Telegraph and The Metro. Prior to Quote Goat, he worked in finance in the city for a number of firms including HSBC.
Loans come in an assortment of different shapes and sizes, all with their own terms and conditions. Regardless of your circumstances, it is likely that, if you haven’t had one already, you will apply for a loan at some point in the future, whether this is from a friend or family member, a bank, or a high street lender. Here are some of the most common loans available, that you may need to apply for in the future if you haven’t already.
If you have been to university, it is likely that you had to apply for a student loan. This involves borrowing money from the government to cover tuition fees and living expenses while studying at university. If you are on a particularly low income, have a child, or are a carer, you may be able to receive more money, and may not even have to pay it back. You start to repay this money back when you earn over a certain amount, and if you haven’t repaid the money after a set amount of years, then the debt will be cancelled.
Start Up Loan
A lot of small business owners fund their start up themselves, using their own savings, but it is understandable that this isn’t always possible. Start up loans are one of the most popular ways of funding a small business, if the owner doesn’t have the funds themselves. Start up loans are backed by the government and are available at a fixed interest rate of 6% a year, available from one to five years. You are also given free guidance and mentoring, which is invaluable if you haven’t run your own business before.
Large mortgage loans are there for people who want to buy a house of their own but don’t have the funds to pay for it upfront. A lot of people view buying your own home as cheaper than paying for rent, as the cost of the home is often less overall than the rent that you would have paid for years on end, and you have a house at the end of it all. Mortgages also have some of the lowest interest rates of all loans but aren’t without their drawbacks. If you fail to keep up with repayments on your mortgage, you could risk losing your home, as your home is used as collateral. The individual payments each month also tend to be more than you would have paid in rent.
Auto loans are like mortgage loans, in the sense that your car may be seised if you fail to keep up with repayments on your loan. If you have a growing family, it may be necessary for you to buy a new car, but you need to consider the repercussions if you can’t keep up with repayments. Auto loans are available through car dealerships and banks, but banks tend to have lower interest rates than dealerships.
Payday loans are available to you for when you run out of money before payday. They are short-term, high interest, and are strongly discouraged by the government and financial experts. Often, if you feel the need to get a payday loan one month, this loan will cause you to be short of money the next month, meaning that you have to apply for another loan. This causes a domino effect that will result in you applying for a new loan every month, and will leave you in thousands of pounds worth of debt. To avoid this, you may want to consider alternatives.
Debt consolidation loans are there to help you to simplify your finances and your debt. If you have a lot of small debts, some people find it much easier to use a debt consolidation loan to pay off these loans, and then just pay off the consolidation loan. This means that you will have to pay off one big loan, rather than several smaller ones, meaning that you only have one interest rate and one day in which payments will go out. Some people dislike debt consolidation loans, as it is essentially moving around your debt, rather than paying it off.
Hopefully, this guide has given you an insight into some of the loans you may need to apply for one day. Lot’s of people avoid loans, as they see it simply as debt, however, as long as you are financially prepared for it, and have a very good reason for applying for a loan, such as buying a house, there is no reason why it shouldn’t be an option.