Different types of personal loans
The type of personal loan you take out depends on how much you need, and what you need it for.
- Secured personal loans. Taking out this type of loan will require you to offer an asset as security (which the lender can claim if you can't repay the loan), however usually offer lower interest rates and fees in return. This is usually the loan you'll need to purchase a new car, however other assets can be used as security as well.
- Unsecured personal loans. These loans don't require you to offer an asset as security, however lender's will usually charge higher interest rates and/or fees to cover the additional risk to them.
- Peer-to-peer loans. The new kids on the block. When you take out a peer-to-peer (P2P) loan, the loan is funded by other individuals, rather than a single bank/lender. Due to most P2P lending marketplaces (such as Harmoney or Squirrel) operating online without much overhead, they can often offer lower interest rates than banks depending on your credit history.
What can I use a personal loan for?
You can use a personal loan for a number of things, including:
- Buying a car
- Debt consolidation
As with any type of loan, you should ensure you only borrow what you can afford to pay back, bearing in mind the interest costs and fees. Compare personal loans using our comparison tool to find one that suits your needs.