Types of loan available in the UK
Hillhouse's guide to different types of loans.
Flexible Loans
As the loan market develops providers have become more and more competitive. As a result certain providers now offer the facility for you to over pay the loans. This can either be done by regular monthly payments or by lump sums as and when your budget allows. This combined with a low interest rate means you can reduce the term of your loan and greatly reduce the overall interest you pay.
Unsecured Loans
An unsecured loan is not secured against your property and is therefore a greater risk to the lender. A typical unsecured loan will have a slightly higher rate of interest and will be far more difficult to obtain. The checks done by the lender will be more stringent than that of a secured loan. Unsecured loans are available from £3,000 to £25,000 and payable over terms of between 1 and 10 years.
Secured Loans
A secured loan is a loan that is secured against your property. This type of loan is less of a risk to the lender and as a result you will enjoy a more competitive rate of interest. Loans are typically available for amounts between £3,000 and £100,000 and payable over anything from 3 to 25 years depending on how much you can afford to repay each month. If you have had previous credit problems or find it difficult to prove your income this is the ideal solution to your loan requirements.
Self-Employed Loans
Most lenders are now offering competitive low cost loans for self-employed applicants on similar terms as if you were employed. There are also excellent offers on 'self certification' loans where the lender will not require any proof of your income. However, your adviser will require satisfaction of affordability.
Fixed Rate Loans
Many of the secured loans available in the UK offer a fixed rate facility. This means you know exactly what you are going to repay each month for the term of the fixed rate which would normally last for 5 years. The loan can then be set up and you do not have to worry about the influence of fluctuating interest rates.
125% No Equity Loans
If your mortgage is very close to or more than the value of your property then the amount of loan you can take is sometime limited. 125% loans are now available so you can borrow more than the value of your property making it possible to raise the monies you are looking for.
Postponed Start Loans
Some of the lenders will allow you to enjoy a loan today but not commence repayments for up to 3 months. This is excellent as it allows you to borrow the money now and not begin repayments until a time that may be more convenient. Some normal examples would be at Christmas, if your going on holiday or just need to get your finance back on track.
See also: types of mortgages, Mortgage advances and remortgages.