Types of Loans and all Different Definition

Business Loans

A loan taken out (usually still in an individuals name) for any business purpose.  It could be for growth, to sustain or to consolidate business debts.

Peer-to-Peer Lending

A loan issued where the lender and the borrower are both consumers.  An individual can invest cash to lend at a set interest rate, the borrower can accept the loan agreement and receive the monies through an intermediary platform.  Examples are Zopa and Lending Works.

Payday Loan

A loan usually taken for less than 30 days, and for under £1,000, paid back in full with interest on the consumers next scheduled pay date.

Student Loan

A loan issued exclusively to students to fund a University or College education.  They are provided by the Government run Student Loans Company, and are paid back off future earnings as long as a minimum earnings threshold is hit in the borrower’s employment.

Consolidation Loan

A loan taken to pay off numerous outstanding credit accounts, to bring them under one account with one payment.  Usually taken out to reduce the level of monthly outgoings to unsecured credit.

Debt Consolidation Loan

As above.

Fixed Rate Loans

Most personal unsecured loans will be fixed rate.  This means that the interest rate and the monthly repayment will remain constant throughout the term of the loan.

Bad Credit Loans

This is a phrase sometimes used around the internet to describe loans for people with a less than perfect credit score.  It is a slang term however.  There are no official “bad credit loans” specifically.

No Credit Check Loans

Used by some loan marketing companies to try and attract applications from people with bad credit.  No credit check loans don’t exist.  See here for more information http://www.easyloanscompany.co.uk/no-credit-check-loans/

Secured Loans

Loans secured against equity in a property.  Usually residential, although there are lenders who will secure against an investment property.  Secured loans will usually go as the “second charge” after the mortgage.

Unsecured Loans

Otherwise known as a personal loan.  Not secured against any asset.  Usually a fixed payment amount over an agreed period of time.

Interest Free Loans

These are a rarity in the market.  It is unlikely to you will be able to get your hands on an interest free loan unless it is linked to a goods purchase.  Furniture stores are one example of companies who may offer interest free credit to secure the sale of their goods.

Door Step Loans

A loan taken out which is collected in instalments (usually weekly), by a representative of the lender visiting the borrowers home address.  Provident Home Credit are the best example of this.

Logbook Loans

A loan issued where your car is used as collateral for the advance.  The car is at risk if the loan is not paid back at the terms agreed in the contract.

Personal Loans

See Unsecured Loan.

Home Improvements Loans

A loan taken out with the express purpose of improving a residential property.  This is with a view to increasing the value of the home.  A large proportion of secured loans are for this purpose.

Car Finance Loans

A loan taken out to purchase a new or used vehicle.  Usually secured against the vehicle for the term of the finance.

Bridging Loans

A shot term funding option, usually taken to “bridge a gap” to a sum of money coming due to be received by the borrower.  Used a lot in property transactions when completions are due on different dates.

Self Employed Loans

Loans issed to consumers who are not employed by a company.  Self employed loans usually require a larger amount of underwriting by the lender due to it being more difficult to prove the borrower’s income.

Loan Calculator

A tool available at a variety of places online which will allow you to work out loan repayments based on loan amount, interest rate and term.  One example is http://www.thisismoney.co.uk/money/cardsloans/article-1633405/Loan-repayment-calculator.html

Guarantor Loans

Guarantor loans are usually taken out by people who may not have a good credit score, or have no history of borrowing money.  The loan will be “guaranteed” by a friend or family member who does have a good credit score (they also usually have to be a homeowner), and income sufficient to cover the loan if the borrower can not meet the repayments.


This is another phrase used by online marketers to try and attract loan applications.  There are lenders out there who have very fast payment processes once a loan is approved but this is in no way guaranteed, especially if more information is required before the lender can make a decision on whether to lend to you or not.

Personal Asset Loans

A loan secured against a valuable item you own.  The item must be free from other finance, and will be valued by the lender prior to them making a loan offer.  They also usually keep hold of the item for the term of the loan.  www.borro.com are a good example of a personal asset lender.

Equity Release

The act of taking out finance which is secured against the available equity in a property.  Equity Release is generally available to those over the age of 55, and the resulting finance can be taken in a lump sum, in several smaller amounts or a combination of both.

Loan Broker

A company who will work with a panel of lenders to source loans or finance for their applicants.

Short Term Loans

As the name suggests, these are loans taken over a short period of time.  Usually between 1 – 12 months.  Interest rates are usually higher than regular personal loans.

Budgeting Loan

This is a loan provided by Government to pay for essentials like furniture, clothes or moving costs.  They are interest free, and the repayments come directly out of your benefits.  You are eligible to apply if you have been receiving income related benefits for at least 26 weeks.

Credit Union Loans

Credit Unions service the local area in which they are based.  You will generally need to sign up to a savings account with the Credit Union initially, after which time you will be eligible to apply for a loan through them.  Credit Unions can be a cheaper alternative to short term or pay day loans.

Social Fund Loan

See Budgeting Loan

Poor Credit Loans

See Bad Credit Loans

Bank Loan

This is the usual standard loan which is issued by a high street bank.  They have become increasingly hard to get recently, but are still available for people with a good credit rating.

Text Loans

There are some loan companies (mainly payday lenders) who will allow you to request a loan by text message.  This will only be if you have gone through an application with them before, and they have all of your details on their system.

Home Loans

This is another name for a Secured Loan.  Borrowing is secured against the equity available in your property.