4 Commonly Purchased Types of Loan

4 Commonly Purchased Types of Loan

Loans are a form of financial lending that – in theory – benefits both the lender and the lending organization. In practice, however, not all loans are created equally. Therefore, before you borrow any money, you need to ensure that you have conducted a deep dive into the kind of loan you are receiving. Here is a quick guide to some of the most popular kinds of financial loan sold in the United Kingdom.

4 Commonly Purchased Types of Loan

photo by Mikhail Nilov from Pexels




Car Financing

Cars are expensive, but for many people, they are completely essential. People who need cars for work or live in rural areas cannot rely upon public transport to get where they need to go. Car finance companies help people pay incrementally for a vehicle while making a profit on the small quantities of interest that is applied to the price. Popular used car finance companies offer much more competitive interest rates than personal loans while essentially helping pay for very expensive items. Be very careful when taking out a financial plan to help pay for a car. Ensure that you can guarantee your income during the payment stages or find yourself in rather hot water.

Payday Loans

Payday loan companies prey on some of the people made most vulnerable by unrestricted capitalism – people on low or insecure wages. They charge huge rates of interest for instant cash. This often means that people with no savings to fall back on end up owing huge amounts of debt to loan companies, forcing them to take out more loans to cover the interest costs and sending them spiraling into poverty. Luckily, payday loan companies are collapsing at a rapid rate in the UK thanks to customer lawsuits and financial regulatory inspections. However, the benefits offered by payday loan companies in no way match the terrible effects they can have on people’s lives.

Overdrafts

Overdrafts are not, strictly speaking, loans. They are, however, very closely related. An overdraft arranged with a bank allows for a variable amount of borrowing once an account goes into debt. Interest rates are often high for overdrafts, but some members of the population – like students – can access them for free with most banks. As with all kinds of financial borrowing, customers need to be very careful not to rely upon overdrafts too much.

Mortgages

Most homeowners will need to use a mortgage to purchase their house unless they are fantastically wealthy. Mortgages are a kind of loan that allows you to pay back the money borrowed from a bank for the purchase of a house in increments. Prospective homeowners need to pay a deposit to the bank to reassure the lenders that they intend to keep up payments. In the UK, most mortgages require a deposit of around 10 percent. This makes mortgage lending relatively unaffordable for most young people – contributing to the lack of property ownership amongst people born after 1985. Mortgage payments are often much cheaper than equivalent rent payments. Affording the deposit, however, is another story. 

2 Comments

  1. Payday tu teda di Malaysia kan? Belum pernah dengar lagi jenis loan tu

    ReplyDelete
  2. Car Loan checked.
    Home Loan on the way.....
    personal loan, jauhkan lahhhh. jenuh bayar kang!
    hahaha

    ReplyDelete

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