...loans?

Firstly, it's worth remembering that nobody under the age of 18 can borrow money. Secondly, it is a simple fact that for 99% of the adult population, loans of one description or another are effectively a way of life. Of course, loans can vary dramatically in size and in the duration of their repayment… from small, short-term loans (such as those which are typically taken via credit card) to large, long-term loans (such as a mortgage) with many variants in-between.

Following is an overview of the main types of loan available and by clicking on the highlighted links you can find further guidance.

Mortgage

Probably the most significant sum of money you will ever borrow, enabling you to purchase your own home. The sums involved are typically several times your annual income and likely to be repaid over long periods of time, 20 - 25 years being the norm. They are secured against the property you purchase. [more...]

Personal Loan

A good example of when you might take out this type of loan is if borrowing money from a bank or building society to purchase a car. Repayments are usually made monthly, over a fixed term which is typically between 1 - 5 years. Rates of interest can vary significantly so it pays to shop around.

Student Loan

This is a two-part loan from the Government to help you manage the cost of further education studies. One part covers tuition fees and the other part covers your cost of living. You are not required to repay a Student Loan until you have started work and are earning at least £15,000 a year. In real terms you won't have to pay back more than you borrow as interest rates are set far lower than normal loans, to mirror inflation. [more...]

Overdraft

This is a short term loan provided by your bank or building society as an extension of your current account. Unless you are a student (for whom many banks now offer free overdraft facilities) there will be a pre-agreed interest rate. However, if you go overdrawn without an authorised facility, you will find yourself paying an additional penalty. [more...]

Credit Card

The easiest way to pay for items with money that isn’t yours! Furthermore, if you repay your monthly balance in full and on-time, the loan should cost you nothing. However, if you do not repay your monthly balance in full, interest rates can be punitive. Credit card debt in the UK has spiraled over recent years and is now a cause of serious concern, with hundreds of thousands of people owing many thousands of pounds they can barely afford to repay.

Store Card

These work in much the same way as credit cards, but can only be used in the store that the card has come from. Whilst they may bring occasional benefits in the form of extra discount (usually at the time of signing-up to incentivise you) retailers particularly like them because they encourage loyalty and because they generally tend to charge you even higher rates of interest than credit cards. Proceed with caution!

Hire Purchase

Rather like a personal loan but with higher rates of interest. Also, you will not be the legal owner of the item in question until you have made the final payment, which is not the case with a personal loan. Proceed with caution!

… one other type of loan (and one that often comes interest free) is from your parents of course, assuming you haven't already asked…!