Loans
A common sense guide to loans
Loans are issued by banks and other financial companies. They allow you to borrow a fixed amount of money, which you then pay back in instalments over an agreed period of time. This could be anything from 12 months to five years typically, although longer repayment periods are offered on some loans. You'll pay back the original amount you borrow plus interest and charges the amount of this varies, but will be indicated by an Annual Percentage Rate (APR).
If the loan you choose has a fixed interest rate, the amount you pay each month will stay the same, unless you are advised otherwise. If you opt for a variable rate loan, you will need to be prepared for the monthly amount to change. This could mean that it goes up or down but it's an important consideration when it comes to budgeting your finances.
There are lots of different companies offering loans, but broadly speaking they fall into two categories: secured (sometimes known as a homeowner loan) and unsecured (often referred to as a personal loan). Secured loans are only available to homeowners who have enough equity in their property to secure against the debt. Unsecured loans are available to anyone who meets the lender's criteria.