Types of Loans
There are really only two sorts of loan:
- A Secured Loan is a loan that is made because you already have something of value, like a home or a car. The amount of the loan depends on how much the lender thinks your home or car is worth. If you don’t pay back the loan in the way you agree with the lender, they can take action to make you sell your home or car to pay off the debt.
- An Unsecured Loan is a loan that is made because the lender believes you will pay them back in the way you agreed. The lender decides what your ‘credit-worthiness’ is before making a loan. Credit-worthiness means how much the lender trusts you to pay back the loan, based on your past history with money.
Things you should know about taking on a loan
- All types of loan will cost more money to pay back than you borrow because the lender will charge you interest.Find out about interest on money you borrow
- All lenders should ask you to sign a contract saying you agree to their terms before they give you a loan.Find out about these contracts
- All lenders will take action against you if you don’t stick to the terms of the loan.Find out about what action a lender can take
Getting a loan might be the right thing to do for you. There are different places to get loans from.
Not interested in getting a loan?