Secured / Unsecured Loans vs Short Term and Payday Loans

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The Consumer Credit Market can be confusing sometimes when it comes to deciding which type of Loan is best for your specific needs. It is indeed prudent for you to compare payday loans and lenders before applying. 

Let’s explore some of your options:

Secured and Unsecured Loans

These are typically Personal Loans that are generally provided by Banks and the larger Credit Houses.

The amount you can borrow varies from £1000 to £30000 although for Secured loans, it can be higher if you secure the loan against sufficient equity; your home for example.

These loans are mostly used for Home Improvements, Debt Consolidation and Motor Vehicle Purchases. They can also be used for small Businesses to meet start-up or expansion costs.

The duration of these loans is usually from 1 year to 5 years. Again, Secured loans are different to Unsecured in that they can be for far longer.

Interest rates vary too and are highly dependent upon an Applicants Credit Score with the Credit Reference Agencies. A poor credit history will inevitably mean more expensive loans or declines.

Short Term Loans and Payday Loans

These loans are exactly as they are named; they are strictly Short Term. Generally they are from 1 week to 12 months with the Short Term Loan Payday alternatives being from 3 months to 12 months while the loans aimed at covering an immediate small expense being from 1 week to 1 month.

The interest rates for these loans are capped by the Financial Conduct Authority at 0.8% per day. It should be noted however that the Annual Representative APR’s used to describe the cost of this type of loan is very high but it must be read in the context that the loan will not be repaid over a year but over a far shorter period.

Unlike Unsecured and Secured Loans, these loans can be acquired by Applicants with a poor credit history. They are also quick to obtain if approved and noted for their convenience; indeed instant decision payday loans are very popular.