Published: 01/09/2021

The best loan for you

A loan is a big commitment. They vary in their interest rates and repayments schedules, so it's important you know which may be the best loan for you.

Loans are usually secured or unsecured. A secured loan is tied to something that can be claimed by the lender if you don’t pay. An unsecured loan isn’t tied to anything. So here we go - the 6 types of loans:

Personal loan

1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.

If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.

Other lenders offer personal loans that can be used for most things. Interest rates and repayments can be fixed or varied, and though most lenders advertise a representative annual percentage rate (APR), it only has to be offered to 51% of customers.

Generally, personal loans, especially smaller ones, have higher interest rates than other loans. A poor credit rating often increases the interest rate even more. Longer term loans may have lower rates of interest But, it may cost more to pay off more quickly.

Car loans

Car loans come in 4 forms. The first is a type of personal loan  mentioned earlier. The others are specifically for vehicles.

Hire purchase is a loan secured against the car. This means you can use it while making repayments, but you don't own it until fully repaid. If you don’t pay the car could be repossessed. Some hire purchase plans require a deposit; the rest of the cost is covered by the repayments.

PCP – a Personal Contract Plan may require a deposit. At the end of the deal you can either pay a lump sum to own the car, return the car, or trade it in for another car. You never own the car during the contract, so you won't be able to modify it or sell it, and you have to stick to a mileage limit.

Lease - you pay a fixed amount every month to use a car within an agreed mileage limit that ends with you returning the car. The monthly cost often includes maintenance, and the amount will depend on the vehicle.


A mortgage is a loan normally taken out when you buy a house. It can come from a bank or building society, or else a mortgage broker who finds the best deal for you.

Home equity (Second mortgage)

A home equity loan is similar to a mortgage in that the equity in your home is used as security or collateral for the loan. They are often referred to as a second mortgage. The equity is the current market value of the property minus your remaining mortgage payments. a good to excellent credit history is usually needed and the loan normally has a fixed interest rate and a set repayment period.

Credit card

A credit card is a way of borrowing money that you repay every month. Normally you are charged interest for borrowing the money, but some do promote interest free periods.

Some come with various benefits, such as offering protection for purchases made with the card. Some have the option to consolidate any other debt into one single payment.

Payday loan

A payday loan is a short-term loan, usually with a very high interest rate, intended to tide you over until payday. It's important to remember the following points.

The full amount of the loan owed is taken from your bank account on repayment day no matter what, that can leave you short again and due to the high interest rates,  lead to even more debt and badly damage your credit rating if not paid.


If you're planning to buy a new settee, a car or a house, with smart shopping around you can find the loan suits you perfectly. But if you apply without being fully aware of the terms, then you could end up in a debt spiral.