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, 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.
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.
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.