What loan is the right one for you?
Dec 4, 2019
PERSONAL LOANS
A personal loan is a fixed amount of money, borrowed at a fixed rate and repaid over a fixed amount of time. They are provided by banks, credit unions or online lenders - on the basis of key criteria such as income level, credit and employment history, repayment capacity, etc. They can be used for multiple purposes; maybe you have an unexpected bill or perhaps there is a project you have to work on as soon as possible.
They are great for anyone with excellent credit. However if you don’t have excellent credit history, then some personal loans might come with an interest rate so high that it’s more than some credit card rates. It’s important you know the interest rate before taking out a personal loan.
The minimum age limit to apply for a personal loan is 18. The maximum age can go up to 60 years (salaried employees) and 65 (self employed). However, age limits do vary bank to bank. Your income should also be at least £25,000 per year.
SHORT TERM LOANS
“Short term” just means that the loan is designed to be repaid quickly or in a short amount of time, most terms normally include repayment plans lasting months. They are made for when life sometimes puts us in tricky positions that involve having finances at hand.
Applying for a short term loan requires a lender to carry out a credit check on you. Whilst previously this would have decreased someone’ s chance of being accepted if they had a less than perfect credit score, many lenders are now changing how they assess a person’s suitability.
In terms of monthly repayments, short term loans can be more expensive than longer term ones. This is simply because you are paying the amount owed more quickly.
BUSINESS LOANS
These are similar to personal loans but they’re specifically intended for business purposes, to help manage your cash flow or to expand. The interest rate on the loan is based on a number of different factors, including the health of your business and how much you’re borrowing. There are two options when it comes to these loans; small business loans or merchant cash advance.
Small business loans are for the short term, which are paid off at a fixed rate. Merchant cash advance is short term cash that you repay as a percentage of your daily card sales. Almost any small business can get a loan, the most common types include: pubs, restaurants, retailers, hotels, garages, beauty salons and more. The criteria that makes you eligible for a business loan is simple; you can apply for one if:
Your business has been operating for three years or longer
Your business has an annual turnover of £70,000 or more
If you don’t meet this criteria, a merchant cash advance might be suitable instead.
Your business can receive the money it needs in as little as two working days. The application processes are straightforward and only usually require documents such as proof of identity and last three months’ bank statements for the business.
GUARANTOR LOANS
A guarantor loan is a type of loan which requires a guarantor to co-sign the loan agreement. The guarantor is someone who agrees to repay money if the original borrower is unable to. These types of loans are a perfectly legitimate way to help someone with a less than perfect credit rating get the finance they need.
Guarantor loans are most suitable for:
Someone with no credit history, e.g. a young person or someone who is new to the country
They’ve just started a new job
They have a low income salary
Almost anyone can be a guarantor; they are most often parents, spouse (as long as you have separate bank accounts), sibling, friend, or even a grandparent. However, you should only be a guarantor for someone you trust and ar
