What is a loan?

A loan is when someone gives you money that you have to repay over a period of time. There is an interest charge added on top of a loan.

If a loan is not repaid on time, there may be more charges added to it.

Interest is additional money. On a loan this is extra money you have to pay for borrowing money.

How can loans help?

Loans can provide cash for a long or short period of time.

If a loan is for a short period of time, there may be a higher interest charge.

If a loan is for a long period, the interest charged may be lower but the total amount repaid could be higher.

Loans mean you can borrow money to help you to make a big purchase, or if you are in a difficult financial position.

A loan can be a big commitment. If you are considering taking a loan, speak to someone you trust.

Types of loan

Common types of loans include:

  1. Payday loan

A payday loan is a short term loan. Payday loans are offered by high street shops and also advertised on the TV. These are often more expensive than other types of loans and charge a higher interest rate.

  1. Bank loan

A bank can lend someone money for a long or short period of time. A bank can lend a large amount or a small amount of money.

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