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Loans
There are a few options when you get a loan.
Loan amount: This is simply the amount you wish to borrow. You
can get loans for almost any amount from £1000 to £1000000.
Loan length: This is the amount of time you have to pay back the loan. Usually these
are measured in months.
Interest rate: This is the rate at which you are charged for the loan. This is
typically a percentage per year. The higher the number the more expensive the loan is.
Some loans have a fixed interest and others are variable which means the rate can go up or
down.
Monthly payment: This is the amount you need to pay to the loan company per
month. If the loan is a fix rated then the monthly payments will stay the same every month
until the loan is paided in full. If the loan has a variable rate then the monthly payment
may go up or down.
In the UK the base rate is controlled by the Bank of England.
Typically
any rise in the base rate is in the order of 0.25% to 0.5%. So if you are looking at a
variable rate loan then you should think how much a rate increase effects your payment. If there
is a rate decrease then you will be paying less.
Secured & Unsecured loans: This term can often be misleading. Secured sounds a good word
and unsecured doesn't sound that great. In fact it is the other way around here. Typically a secured
loan is for home owners, this means the loan is 'secured' against your home. If you fail to repay
the loan then your house may be at risk. If the loan is unsecured then it means nothing is taken
as security. Typically an unsecured loan will be for a smaller amount and a secured loan will
be for a larger loan amount.
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