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How to choose the best loan for you

Fri 04 December 2020

How to choose the best loan for you

Finding the right loan could make your borrowing cheaper, lower risk and easier to manage. There are many different types, for different purposes and all with different interest rates to consider.

So while that might make your task a little bit trickier, the ideal loan for you is out there - you just have to find it!

Let’s take a look at what’s available.

Consider why you need to borrow money

Firstly, the reason that you need to borrow cash and how you intend to use it usually helps to determine what kind of loan you need to consider.

Some of the reasons you may need to apply for a loan include;

  • Major home improvements
  • Buying property
  • Buying a vehicle
  • Consolidating debts
  • Making a large purchase
  • Starting your own business
  • Paying for a holiday
The type of loan used to help pay for a holiday differs hugely from one you would use to buy a home.

What different types of loan are there?

Before we get into the various types of loan, it’s important to realise there are two main categories that they all fall into.

An unsecured loan means you don't have to provide the bank, loan provider or doorstep lender with security such as a home or other major asset to back up the agreement.

You borrow a lump sum and repay it in instalments, usually monthly, over a set period.

Secured loans have an asset linked to them so that if you can’t repay the loan, the lender can repossess and sell it to recoup the money.

If there’s a choice between the two, an unsecured loan is better because it does not directly put your assets at risk if your circumstances change.

Unsecured loans
You can use the funds from an unsecured loan for almost any purpose, and common types include personal loans, cash loans, doorstep loans (also known as home collection loans), bad credit loans, guarantor loans and debt consolidation loans. 

Secured loans
A secured loan is more likely to have restrictions on what the money can be used for, and some can only be used for one purpose. Common types include homeowner loans, vehicle financing, logbook loans and bridging loans. 

How much could I borrow?

You can generally borrow between £100 and £25,000 with an unsecured product such as a personal loan.

If you need to borrow more, you will have to look at a secured loan, where the amounts offered can be much higher.

What else should I consider?

As well as thinking about how much cash you need to borrow, and over what time period, you also need to think about your credit rating. 

If you have a bad credit history, the kinds of loans you can successfully apply for may be more limited.

However, there are some types that are specifically tailored to customers with poor credit scores, such bad credit loans and guarantor loans.

Doorstep lenders offering home collection loans and doorstep loans are likely to consider your application, but they may also be more expensive than other forms of credit.

If you have a good credit score then you should be able to pick from all of the available types of loans and are likely to be offered reasonable interest rates.

Do your own research - and be sensible

Look at comparison sites, research different banks, loan providers and doorstep lenders, check client satisfaction scores and ALWAYS check the terms and conditions thoroughly before you sign a loan agreement.

Any type of loan, from a doorstep loan to a mortgage, could potentially become expensive if it comes with a high interest rate or if you’ve chosen a lengthy repayment term.

And remember, missing payments can be just as harmful to your credit score whether you fall behind on a £500 doorstep loan or a £25,000 personal loan.

Representative 466.37% APR. Morses Club specialise in small cash loans and doorstep loans to help with unexpected expenses. Our home collection loans aren’t right for everyone, and you should only borrow what you can afford to pay back. If you would like to find out if a Morses Club cash loan is right for you, read our FAQs for more information.

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