Types of UK Loans

You must consider whether you want a short term loan for a holiday or for buying a computer, or, a long term loan for building a house or investing in some business.

Unsecured Loan

A short term loan, also called the personal loan, is mostly unsecured, which means the borrower does not have to mortgage any asset to secure this loan. It is a small loan, which in most cases, is paid back over a short period of time. The process of application is relatively simple.

Secured Loan

The other type is a secured loan. This loan involves a greater amount of money, which can be procured only after mortgaging some asset of the borrower. The repayment period of a secured loan is spread over a fairly long period of time, spanning decades. The process of application for this loan is complicated. In UK, the personal or unsecured loan limit is up to 25,000 pounds and the maximum loan term is 10 years. You can also apply for an online personal loan.

The secured or mortgage loans are available for buying homes only. The loan limit is up to 250,000 pounds payable up to 25/30 years. It is not very simple to obtain a mortgage loan in UK.

The basic questions that are asked when applying for a secured loan relate to the amount of loan, the time over which you can repay, your employment, income, credit history, contact details and so on. If the lender is satisfied with the preliminary information, he processes the application.

The financial institution then ask you questions relating to Payment Protection Insurance, the value of the property to be mortgaged, any other loans secured against the property, the annual household income, and so on.

The grant of a loan may be delayed or even rejected if

You have a poor credit rating because of late payments on bills, loans, credit cards and so on.

Your request for loans or credit cards has been turned down.

You have been awarded county court judgments.

If at all, your application for loan is considered despite poor credit rating, you will have to pay a higher interest rate. There will also be other stringent conditions involved.

UK Loan Providers

There are many personal loan providers in UK. There are high street banks and building societies, which have branches in every town. It may, however, be noted that the high street banks usually charge a slightly higher rate of interest than the online banks.

You can secure personal loans through the UK supermarkets, shops and post offices that offer a variety of credit products.

The third source is the online banks. A great advantage with borrowing from online banks is the lower overhead charges, which in turn means a lower rate of interest. If you do comparison shopping for personal loans, you will find that online banking offers the lowest interest rates in UK. Another advantage is that you can phone the online company if you face any problems or need any advice.

Yet another source is the borrowing and lending exchanges, which provide low interest rates as they work on cooperative basis.

Brokers do not offer loans directly, but they can prove a great help in securing low interest rate loans.