Money and Loans > Which Loan Is Right For You?

Which Loan Is Right For You?

Posted on in Money and Loans, Money TipsTags ,

Looking to borrow some money? We look at the most common loan types – payday loans, personal loans, secured loans and debt consolidation loans – so you can help work out what’s right for you.

Payday loans

Payday loans, also called short term loans, are small loans (typically from £100 to £1,000) paid out as an advance on your next paycheck. They are usually paid back in a lump sum or over a short payment window.

Payday loans are good if you’re looking for:

  • Cash, quick – if your payday loan application is approved, you can expect to get the money in your account the same day.
  • An online application – you can apply for payday loans online, so no need to go into a bank.
  • A small amount of cash – payday loans are designed to ‘tide you over’ or get you out of a small-scale fix.

However, it’s important to make sure you’re able to make your payday loan repayments. For more about payday loans, see our payday loans jargon buster.

Personal loans

With a personal loan you borrow an agreed amount of money from a lender, usually a bank, and agree to pay it back over a set period. Personal loans differ from payday loans in that the repayment window is usually longer – typically between 1 and 10 years.

Personal loans are a type of unsecured loan, which means they’re not tied to an asset, like your home. So you’re less likely to lose an asset with a personal loan.

Personal loans are good if you’re looking to:

  • Borrow a large amount, typically up to £25,000.
  • Pay back over a long time, up to 10 years.

Secured loans

Unlike an unsecured loan, a secured loan is linked to an asset – usually your home. This means, should you fail to meet your repayments, the lender could repossess your home – the most common type of secured loan is a mortgage.

Secured loans are good if you’re looking to:

  • Get on the housing ladder.
  • Borrow large amounts – typically up to £100,000.

Debt consolidation loans

If you’re in debt, a debt consolidation loan could be an option. With a debt consolidation loan, you move all your debts into one account or loan. This is a way to simplify your debt and pay it back more manageably.

A debt consolidation loan could be good for you if:

  • You have a lot of different debts – e.g. overdraft, credit card, store card.
  • You want to make an effort to pay down your debt.

Generic advice is not a service regulated by the Financial Conduct Authority.

Hilton Freund
Hilton is managing director at Wizzcash. He regularly blogs about personal finance, technology, lifestyle and more - as well as riding his bike.
Other posts you might like

Peer To Peer Lending vs. Payday Loans

Things To Consider Before Taking Out A Short Term Loan

What Can £1 Million Buy Us?

Generation Rent & Debt