Most residents in the United Kingdom hold various types of accounts with different financial institutions. These accounts may include checking and savings accounts, but they also include various types of loans. A bank loan provides you with the ability to borrow a large sum of money and to repay it with regular payments over a period of time. Some loans, such as a line of credit, may permit you to make withdrawals as needed. These loans may include everything from unsecured personal loans and business loans to car loans and home loans. Here are some of the more popular uses for bank loans.
Purchasing or Refinancing Assets
Secured loans are among the most popular type of bank loan available. These are loans that are linked to collateral, such as real estate, a car or a boat. They are primarily used to purchase the asset that is linked to the loan, but many borrowers will also refinance these loans over time. The purpose of refinancing may be to obtain cash out of the asset for investments, for home improvements or for other needs. Some refinance loans are used to reduce the monthly payment on the debt.
Many businesses in the United Kingdom were established using business loans. These loans provide entrepreneurs with start-up capital needed to purchase office equipment, lease office space and pay for other common expenses. However, the funds are also often used by an established business for operating capital or for expansion purposes.
Unsecured loans are another common type of loan, and these may be used for a variety of purposes. For example, they may be used to make home improvements, to purchase furnishings, to pay for a nice vacation or for other needs. Some unsecured loans may be used to refinance or consolidate high interest debts for a reduction in monthly payments or improvement debt management. Unsecured debt may include credit cards, lines of credit or installment loans.
The fact is that many people will have the need to borrow money for various reasons over the course of a lifetime. It is important to understand fully what the different types of loans available to you are as well as how they are used. By understanding when you can reasonably borrow money and how borrowed money can be used, you can more easily achieve personal or business goals and can better manage your finances.
Fiona Harris is a freelance finance writer, specialising in finance and green energy. Her articles regularly feature in a number of UK blogs. You can email Fiona at [email protected]