The headlines in the newspapers make it seem as if bank loans are not available for many would be clients, but the truth is that many bank loans are still available to the average consumer in many shapes and forms. Some are based on personal credit history and current lending needs while others are based on potential capital such as bank loans for small business ventures. Your ability to obtain a bank loan will heavily depend on its use, your credit history, and your current income and stability since you will need to verify that you are a worthy lending partner.
As the name denotes, bank loans are granted to approved candidates from finance companies and banks. They allow the recipient to borrow a predetermined amount of money in return for a promise that the money will be paid back in monthly or bi-monthly instalments over a fixed period of time. The typical instalment plan varies between one to five years although some loans such as mortgage loans or small business venture loans will allow for a longer repayment term. In exchange for the loan, the recipient agrees to pay back what is owed plus interest for the time that the instalment period lasts.
Before obtaining bank loans there are a few things that need to be considered. Important considerations include the type of borrowing that you have in mind, the definition of an APR, the total cost of the loan including interest, the difference between a secured and unsecured loan and what you may qualify for, and your credit score as this will play a large role in any bank loan that you hope to acquire as well as the interest rate that is assigned to your bank loan.
When applying and receiving bank loans it is important to consider if you want a variable rate loan or a fixed interest rate loan. In a fixed rate loan the amount that is owed every month remains the same unless a term of your agreement is violated or changed by the banking institution as authority has been granted them in the agreement terms. On the other hand, a variable rate loan is based on the Bank of England interest rate, which can fluctuate, thus you will need to be prepared for monthly payments to alter from month to month.
In general there are also two broad categories of bank loans that most loans fall into, unsecured and secured loans. Secured loans which are also referred to as homeowner loans place an asset against them to back up the funding source. For example, if you own a home you may be required to secure the bank loan with your home matching it value to value thus the money is considered secure when it is released to you. On the other hand, unsecured loans are given based on income and credit worthiness without any additional collateral required. Unsecured loans are often called personal loans.