With a large number of loans available on the common market, it can be difficult understanding what they all mean and, more importantly, which one is right for you. From deciding between different companies to different types, it can all get a bit much. So to help you with your decision making process, here’s a simple guide to the different types of loan available to you.

Personal Unsecured Loans – The most common type of loan based on the number of people using them, the personal unsecured loan has both good and bad points to it. The fact that it is unsecured means, quite literally, that you have not secured it and therefore there’s no collateral to claim against should you default. On the downside you could be facing legal action should you fail to make the payments. The lender also has no claim to anything you’ve purchased with the loaned money, but due to this lack of security for the lender the interest rate will be higher. If you think that you’re likely to default on the repayments then you may wish to consider a different type of loan.

Personal Secured Loans – In essence these are the same as the unsecured loans, except with a secured loan you offer the lender collateral to allow for the event of you defaulting on the repayments. The security you agree upon can theoretically be anything, such as a plane or a car, but usually it is agreed to be a house. The upside to the secured loan is that your interest rate will be significantly lower as the lender need not worry about getting their money back, they’ll be paid either way whether it’s through you keeping up with the payments or them having to repossess the collateral. Most banks, such as Alliance & Leicester, offer these and the low interest means that relatively cheap loans are accessible and safe.

Internet Loans – Some loan companies deal with the majority of their customers’ loans online, meaning that they can afford to offer lower interest rates as their overheads will obviously be lower. These can be good and bad; good because the rates are lower, but bad because it’ll be harder to find someone at the company to talk to should you run into trouble or need some extra time for your repayments.

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