We have all had times when we have been a little short of cash.  Times when there has been more month than money.  Borrowing money, whether it is from a friend or relative, your bank or a loan company is a short term fix.  Responsible lending and responsible borrowing work together to ensure that loans are affordable and fair.  Under new regulations designed to stop unscrupulous lenders charging sky high interest rates, all lenders must ensure that loans are affordable and will not cause borrowers any undue financial distress.

Borrowing Money
Borrowing money should only be a short term fix

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Borrowing Money – Types of Loans Available

Payday Loans

Payday loans are very short term loans – from one week to a month.  They are designed to provide emergency cash if an unexpected expense occurs midway through a month.  They are a modern version of an advance on wages.  New rules on interest rates and lending has seen many payday lenders vanish from the market place.  Payday loans are a very expensive form of borrowing.

Guarantor Loans

Guarantor loans are designed for people with poor credit who cannot get a loan in their own name.  These loans use another person who is willing to guarantee the loan if the borrower cannot repay.  The guarantor must have good credit and be willing to accept the responsibility of maintaining payments if the borrow defaults for any reason.

Secured Loan

A secured loan is secured on an asset – usually property.  A mortgage is one kind of secured loan.  If the borrower cannot keep up the repayments on this sort of loan then they could lose their property.  These types of loans are usually long term – a secured loan for a period of less than five years is unusual.

Unsecured Loan

An unsecured loan is not secured on any asset.  Most bank loans are of this type.  They are usually only available to people who have built up a good credit record.

Logbook Loans

These loans which are sometimes called V5 loans are loans secured on a vehicle.  The lender keeps the cars documents as security, whilst the borrower retains use of the car so long as the loan repayments are maintained.  There must be sufficient equity in the car to secure the loan, so the car should be relatively  new and free of finance.

Doorstep Loan

A doorstep loan, sometimes known as personal credit or door to door lending, is a type of loan which is repaid weekly.  These types of loans are sometimes marketed to people on low incomes or with poor credit.  An agent calls at the borrowers house weekly to collect repayments.


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