Loans can be a useful way of borrowing money. There are lots of different ways you can get a loan so you need to be sure you choose one which suits your circumstances and that you can afford the repayments.

Find out more about the most common types of loan, who provides them and how to avoid illegal lending.

What you need to know

Before you borrow money, it's important to make sure you will be able to keep up the repayments, otherwise you could be taken to court and might even lose your home or other possessions.

Short-term loans

These are usually for small to medium amounts of money and meant to be repaid over a short period of time from a month to a couple of years. Short-term loans are not secured on your home or car but you still have to pay them off. If you don't, or can't make the payments, the lender can go to court to try and get its money back and if you don’t pay your credit rating would be damaged. They tend to have higher interest rates than secured loans.

Money fitness tip

Don't be tempted by unregulated lenders (known as loan sharks). Their loans are very expensive and you could get into serious financial difficulty (or worse) if you take out a loan with them and can't pay it back.

Short-term loans include

Long-term loans

These are for larger amounts of money, from about £10,000, say for home improvements and are usually secured on your home. This means the lender can repossess your home and sell it to get it's money back if you can repay. They usually come in the form of a second mortgage or secured loan.

Deciding which type of loan you need depends on how much you need and how long you want to borrow for – see Secured and unsecured borrowing compared.

Last reviewed: 18/06/2018