Which Type Of Loan Is Right For Me?

So, it’s come down to buying that huge TV, or funding that holiday, but which financing option should you choose? It’s no secret that there are dozens of them, and each has its own set of benefits.

There are a couple of important things you need to know before getting a loan, and one of them is which one is right for you. So, read on as we explore a number of your financing options, and the advantages of each…

Payday loans

Those of you who are unlucky enough to get paid monthly will probably have heard of this gem. A payday loan, as the name implies, will tide you over until your next payday. As such, they tend to be smaller sums, which are easier to pay back.

That being said, interest is very, very high. If you find yourself hit by a sudden expense - broken boiler, broken car - then payday loans could help. Just make sure you can pay it back with your next paycheck!

Secured loans

Secured loans, also known as second charge loans, are a much easier way for people to secure financing. This is because how much you can borrow is largely determined by your assets, and not your credit history.

This means that if you’re already in debt, and can’t borrow again due to poor credit, this could be your way out. Bank lending policies tend to be incredibly strict, but here, if you’re a homeowner you may find it simple to borrow. As always, just make sure you repay on time!

Overdraft

Not to be used excessively, an overdraft is typically a way to borrow extremely small sums for a short period of time. Some banks charge you each day that you haven’t paid back, so you don’t want to borrow for too long.

Check with your bank account provider, and see if your overdraft has a buffer. The buffer is the amount you can overdraw without inciting any fees. It’s usually less than 50 in any given currency, so it’s useful if you find yourself short of cash at a restaurant or bar.

Student loans

Believe it or not, but students don’t have to get a student loan. They can take another form of loan if they choose, which may hand out more cash. The standard student loan is probably most ideal though, as it doesn’t have to be paid back until you earn a certain salary.

Credit card

Across the world, consumers are billions into credit card debt, but it’s not as bad as it sounds. At the end of the day, as long as you make your payments on time, you’ll be fine. Credit cards typically offer high interest rates, but some offer an interest free period.

Credit card loans are unsecured, and the interest rate will reflect that agreement. Some people take out a second loan to pay off their credit card debt, a dangerous tactic that can land you in trouble. Upfront, I wouldn’t agree to any hugely long terms - stick to 12 months or less. That way, you avoid the ramifications of any negative financial surprises, such as job loss.