Terms of a Loan

There are 2 main types of loan available depending on the term of the loan.

The most common one that people take out is an unsecured loan. This is a loan that if offered by the financial institutions and finance companies and they need no security for the debt. Unsecured loans can not be used for business use or speculative risk taking. Unsecured loans are generally up to £25,000 and the terms of the loan will be covered by a credit agreement.

The loan will be paid back with regular monthly instalments with an interest rate levied dependent on what it agreed at. Most people in employment will be able to take out an unsecured loan, and there are specialist loan companies that will consider you if you have a poor credit rating.

The second type of loan is a secured loan, most commonly a mortgage. This is where the lender will only let you borrow up to a certain percentage of the value of the property that you are wanting to purchase, and the calculation will be based on the earnings of the buyers. The loan is required to be paid off with regular monthly instalments and until the loan is paid off in full the lender has the rights to your property. If the loan is defaulted on the lender will repossess the property and it can then be sold to pay off the loan.