How to Choose the Right Type of Loan

If you are looking to borrow some money, you can end up getting rather confused with the amount of loans out there. Choosing the right type of loan and then between the different lenders can be really difficult. Unless you have a financial advisor to help you with this task, you could find that you will be struggling to manage. There are some ways though that you can break down the task so that you can look into each part and this should help you to have a better understanding and therefore make the right choice for you. It is wise to start with finding out about what loans are available and seeing which types of lending they are most suitable for. Then once you have chosen the type of loan that you want, you can think about which lender you want to use, comparing them on price and other factors.

Find out about loan types

The best way to start is to find out about the different types of loans that are available. There are so many different ways to borrow money that it can be tricky working out which will suit you. It is important to think about your borrowing so that you match it to the right type of loan.
Amount needed – Firstly think about the amount that you want to borrow as this will make a big difference. Smaller amounts can be borrowed using an overdraft, credit card or payday loan while bigger amounts you would use a personal loan.

Purpose of loan – Some loans are for specific purposes such as using a mortgage to buy a home, a car loan to purchase a vehicle and a student loan to cover university costs. Therefore it would only be relevant to take out one of these if you were borrowing for those purposes.

Repayments – it is important to think about how you want to repay the loan. With some types, such as personal loans, you will have a fixed repayment schedule where you will need to repay a certain amount each month. With others, such as an overdraft, it will repay when the money is available and with a credit card, you will just have to repay a minimum and then can choose when you repay the rest. With a payday loan you will normally have to pay it all back in one lump sum. It is worth considering which of these repayment types would suit you the best considering how much money you have available for repayments. If you think you could manage to pay back a lot, then repaying over a short period would suit you, but if you would rather repay smaller amounts then you may need to repay over a longer period of time. It is also worth considering the cost implications of the different methods.

Cost – there will be different costs depending on the type of loan that you choose. The interest rate tends to be lower on a longer term loan, but because you have the loan for longer, the total cost of the loan in monetary terms could be higher. If you have a short term loan, although the interest rate will be high, you will normally only have it for a very short period of time and therefore this will keep the cost down. It is therefore worth comparing costs of different types of loans.

Compare Lenders

Once you have chosen which loan type will suit your needs the best, you will need to think about which lender to choose. You will want to compare them on cost and find out which would be the cheapest for you to use, making sure that you take the interest rates and any fees into consideration. However, there are reasons why most people will not automatically go with the cheapest lender. There are other factors which they will also consider when they are looking into a loan.

Reputation – many people will want to use a lender that they trust. Some lenders you may not have heard of and others you may have hear good or bad things about. It is only natural that you will be interested in the one that you have heard good things about and will want to avoid the one that you have heard bad things about. You may wish to do your own research as well though, to make sure that you really are happy with the lender.

Customer service – you may wish to make sure that the lender had good customer service. You may feel that if you have any sort of a problem and need help or just have questions, that they will be available to help you with it in an efficient and polite way.
Location – you may wish to use a lender which has a location near to where you live. You may want to be able to go into a branch and see them when you have a question or query or be able to go in and make repayments or things like that. Some people are not concerned by being able to do this though and are happy to use a telephone or communicate online.


So there are a lot of things that you need to consider when you are choosing a loan. Once you have found out about the different loans that are available and worked out which is the best loan for you, you will then have to choose the lender that you feel suits you the best. This can take a lot of time and effort and this is why some people use a financial advisor and others will just choose their current bank to help them out. However, if you do spend some time looking into it, you can end up finding a loan which will save you money and give you good value for money. Just think about what is important to you in a loan and lender and then match those requirements. With so many options available, you should be able to do this and get a loan which you feel will really suit you.

How Important is an Overdraft When Choosing a Current Account?

Many people these days, change their current account frequently as they are looking to get better deals on their banking. Some current accounts offer a good interest rate if you keep money in them or cashback deals and things like that and so people want to swap to them so that they can get a better deal than the account they are currently with. However, it is also really important to look at the overdraft facility, when you are looking at different current account options.

Why is an Overdraft Important?

An overdraft can be important to most people. The facility allows you to borrow some money and can be handy if you run out. If you have a good enough credit record, you will be offered an overdraft of a certain amount at a certain rate. It will then be available for you to use when you need it. It can be a really handy way to get an extra bit of money if you need it. You will not have to arrange a loan as this is already arranged for you. This means that it is especially useful if you need money quickly and do not have the time to think about organising a different loan.

Overdrafts can be expensive but they are also a very convenient way to borrow money. Many people use them to help make ends meet before they get paid. They are paid off as soon as money arrives in the account which means that you will be able to pay it off without really noticing so you will not forget. You can even borrow more money than you have arranged to borrow if you want to, but this is charged at a much higher rate.

What to Look for in an Overdraft

Therefore it is important to make sure that you check the overdraft facility with the account that you are considering. You need to find out how much the charges are to start with. Overdrafts tend to have an interest rate, like other borrowing but may also have a charge. An authorised overdraft will be charged at a certain rate, but if you borrow more than the bank has agreed to lend you, this is called an unauthorised overdraft and will be charged at a higher rate. It is worth finding out what both of those rates are. It is also worth knowing how much the overdraft will be for. Banks often calculate it based on the credit rating of the customer, but it is worth asking if they can let you know how much they might be likely to lend you so that you can compare them with other lenders.

Obviously when you are comparing the price of an overdraft, you will only be able to look at the current prices. Bank change their rates and fees regularly and so you may find that one that you pick because it is cheaper, may not remain the cheapest for long and this can be quite annoying. However, without knowing what they might do in the future there is no way of knowing who might put their rates up and who might lower them. However, you could look at the rate history of the various lenders to see whose fluctuates the most and this might give you an idea of who might raise or lower theirs before others do.

How to Pick Between Overdrafts

You will need to find a way to choose between the different overdrafts. Once you have found out all about them you will have the information that you need to see which looks like it will be the best. However, you will then need to look at other information about that particular current account in order to see what else it offers and whether you are happy with the combination of the overdraft deal and the rest. You need to think about how much you will use the overdraft and how important that rate is to you compared with any other benefits of the account. If you regularly go overdrawn then the overdraft rate will be really important but if you do not go overdrawn often then it will be a lot less important. However, even if you never go overdrawn, you should still be aware of what the overdraft rate is so that you can consider it when you are making your decision.

It may seem like a lot of hard work but it is really important to make sure that you make the correct decision. Although you will be able to change current accounts again, if you feel that the deal is not as good as you had hoped, you will need to make sure that you are not overdrawn before you switch. You will need to be out of debt or else the bank will not let you close your account and you will not be able to transfer an overdraft to a new account. This means that you will need to be really careful while you are trying out the account to make sure that you do not go too overdrawn or else you will be tied into using the account until it is paid off. It can also be quite a hassle changing current account as you will have to swap all of your direct debits as well as standing orders and payments going in which can take quite a bit of work. Although banks are supposed to help you with this, it can still be wise to check that it has all been done properly and so this will take time and effort. Sometimes mistakes are made too which you have to rectify and so it is best to see if you can make sure that when you do switch accounts you make the right choice the first time. If you do a lot of research first, then you should find that you will make the right choice the first time.

Why do Some People think Student Loans are Bad?

Student loans are now the way that students in the UK can finance four years of postgraduate education. They are entitled to borrow a sum of money which should cover their tuition fees and their rent plus some other living expenses and then pay it back when they are earning. There are still many misunderstandings about the loans which makes people feel that they are bad. Below are some of the myths that are not necessarily true.

Loans are unfair compared to grants

It is easy to see how many people would feel that the grant that were available before grants came about were much fairer. The grants covered tuition fees for all students and they also entitled students who had parents that were less well off to get money towards their living expenses as well. This was great for the students who did not have to pay for their courses or all of their living expenses. However, the cost of their education was being paid for by tax payers instead, many of which did not go to university themselves. With the student loan scheme, the idea is that if students get a job paying enough money, they will repay some or their entire loan and therefore pay for their own education rather than other tax payers doing it for them. This could be seen as being fairer to the taxpayers who have not attended university themselves.

Loans advantage wealthier families

It is easier to think that wealthier families will be better off because they have more money to start with However, the amount of money that you can borrow is determined by parental income. This means that better off families cannot borrow as much money and will have to top up the loan with their own money. Those that are not so well off will be able to borrow more and therefore they will even the balance and all students should in theory, have enough money to live off and cover their fees. Yes, those that are less well-off will have more to repay, but they will only have to make the repayments if they are earning enough money to do so.

Once you have a student loan you will have debt for life

It is thought by some that student loan debt can take a lifetime to repay. However, the UK scheme only expects students to make repayments, if they are earning enough, for thirty years. After that any remaining debt is written off by the government.

Some people feel that if students have a loan it will make them feel that it is fine to borrow money from other sources as well. However, unless they have a job, students will not be able to get other loans as a lender will not give them one as they are not earning enough to repay it. A student loan also works very differently to other sorts of debt. The repayments come out before they get paid as they are incorporated into their tax and this means they will not feel like they are repaying a loan.

Loan rate increases mean all students repay more

It is often felt that when the interest rate on a student loan increases then all students will end up repaying a lot more. This is not true for a majority of students. Only about a quarter of students will earn enough to repay their loan in full. This means that the rest will not even repay the money that they borrowed let alone the interest on it. Therefore a rate increase will actually only impact the graduates that are earning the highest amounts. A rate increase will also mean that less students will repay their loans in full as they will be more expensive.

Students are being forced to borrow too much money on their student loans

There is also a thought that students are being forced to borrow more money than they should borrow due to their student loan. However, many students are actually finding that their loans are not enough. In some circumstances a loan might only be enough to pay for the tuition fees and some of the accommodation fees without any left for living expenses. There are therefore people that are saying that the loans are actually too low and that students should be able to borrow more money. This is because a lack of money can mean that they turn to pay day loans or other means of borrowing which are more expensive.

A student loan will make it harder to get a mortgage

A student loan does not show up on your credit record and so should not be a factor for lenders when they are deciding whether they want to lend to you. However, mortgage lenders do look at your disposable income and so that would account for student loan repayments. However, the loan repayments are relatively small and so they should not make a significant difference, especially as a graduate job should pay a significant amount that will give you a big enough income to cover the costs of mortgage repayments.


So if the thought about students having to get a loan has put you off going to university or put off your children then it is worth thinking again. There are a lot of benefits of attending university and more and more people are doing so meaning that when you apply for a job, there will be a lot of applicants with degrees. This means that you may need a degree in order to compete with them even if you have relevant work experience. It is worth finding out about the career path that you are thinking about taking and whether a degree is something that is necessary. It can be worth speaking to a careers advisor or companies in that sector to find out for sure whether they would require you to have a degree or not to work in that field.