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There are endless reasons why you may need a loan, whether it’s for student fees, a car purchase, an emergency or an investment opportunity. Make sure you arm yourself with knowledge about the types of loans available to you before you go to the bank or start comparing loans online so you can get the best possible loan for your situation.

Secured Loan

A loan where you must pledge an asset as security for the money the lender is giving you. This means the lender can take ownership of the item if you can’t pay back the loan. Examples are an Auto loan, mortgage, recourse loan, home equity loan.

Mortgage

A loan for a dwelling, home or apartment, where the dwelling is the security for the bank. If you can’t pay back the loan, they will take ownership of your dwelling.

Home Equity Loan

A loan secured against the equity in your home. The equity in your home is the amount you have already paid off your mortgage (so only the percentage of your home that you own already).

Auto Loan

A loan for a car or vehicle where the vehicle is the security for the bank. This means if you can’t pay back the loan, the bank will take ownership of your dwelling.

Unsecured Loan

A loan that is not secured against any or your assets. Examples are a Personal Loan, Credit Cards and Bank Overdrafts.

Personal Loan

This is a loan that can be used for almost any reason.

Bank Overdraft

This is a loan from the bank that is provided to you when you spend more than your available balance in your bank account. If you have an agreed overdraft limit, you will be charged interest at the rate agreed with the bank, however if you go beyond this, the charges may be much higher.

Student Loan

These loans are only offered to students undertaking professional education. Often they have lower interest rates and can be supplemented by a student grant.

Pay day Loan (sometimes known as a cash advance)

These loans are short-term, small amounts loaned to borrowers only until your next paycheck so generally within a month or a fortnight. They can be convenient but often a very expensive way to borrow money.