Loans

There are two types of loans, unsecured and secured loans.

An unsecured loan is when are loaned a sum of cash and agree to pay this back in monthly instalments which include interest.

For example if you borrow £200 with an interest rate of 29% this means you will have to pay back £258! That’s £58 more than you borrowed.

This can be a very expensive way to get credit and if you don’t pay up you can be taken to court or have you might have to deal with debt collectors!

Always shop around to get the best possible rate of interest.
A secured loan is when you take a loan but you secure it using your personal property or business. This usually means you will get a better rate of interest but it is high risk and if you miss too many payments you might lose your home or property! Mortgages are a good example of this.

Store Cards
Store cards work in a similar way to your credit card. The store will give you a set amount of credit which you can spend on you store card and you are responsible for paying back the money in monthly instalments.

Interest rates can be very high and you must read the small print before agreeing to one.

Catalogues
Catalogues are another example store credit but you will have an account with them instead of a store card. Interest rates tend to be good and sometimes there are no interest rates at all!

But be careful you will probably be paying more for the item than you would in a shop.

Pawn broking
Pawn broking works by you offering a possession in return for a loan of cash. The pawn broker will offer you an amount of cash and agree to keep your possession for a set amount of time. You will then have to pay the money back before you can get your possession back.

If you do not pay the money back in time the pawn broker is allowed to keep the possession. In most cases you will be offered less money than your possession is worth.

Money Lenders/ Loan Sharks
Money lenders are the men or women who come knocking on your door offering you money, this type of lending is illegal and you are not protected by the usual laws. Loan sharks can also change the rules anytime they want.

This means you might agree to a set of repayments you can afford but they can change this anytime meaning you could end up paying a lot more than you thought!