A loan is a way of temporarily borrowing money, which you then repay with interest over an agreed period of time, usually between 1 and 30 years.

There are a number of ways that you can do this. You can apply for a loan or overdraft from your bank or you can approach a loan company, alternatively you can apply for a credit card.

Secured and non-secured loans

There are hundreds of loan companies in the UK that are willing to lend money, and offer both secured and non-secured loans. A secured loan basically means that they will offer you money if you can guarantee it with property, although be aware that most loan companies will not accept foreign property as a guarantee.

A non-secured loan is for people who do not have a property to guarantee their loan, as a result of this it is usually more expensive and more difficult to take out a non-secured loan in the UK. You will find it much easier getting a non-secured loan if you have lived in the same UK property for at least 12 months and have a credit-card that you have been making regular payments on for the same period of time.

Lending and Borrowing 

During the Summer of 2008 the so called "credit crunch" means it has become more difficult to borrow money. This means that banks and other financial institutions are not offering credit without quite careful checks before lending. 

You should make sure that the loan company that you use is regulated by the Financial Services Authority (FSA), this will make sure that they follow the FSA’s money-lending guidelines that give you more protection from any bad practice and assure you that you are using a respected company.

New Arrivals

Getting a loan if you a new arrival in the UK can be complicated because most loans are secured against people’s property, or given to them on the basis of their employment history. So unless you own a home in the UK or have been working for a UK company for a long time you will probably find that it is hard to borrow the money that you need. In this situation you should take some advice from an Independent Financial Adviser. 

The problem here is that the more risky you are to them, the more interest you will have to pay so the longer you will be in debt. For example short term loans, known as Pay-Day loans, can be arranged in the UK, they are convenient but cost as much as £25 for every £100 borrowed, but all you need to have in order to get one is a job and a bank account.

When you apply you will be asked questions such as: How long have you been at your address? How much do you earn? How long have you been with your job? What are your outstanding debts? What is the value of your home? You will also be asked if you have any CCJ’s, which means County Court Judgement, these are given to you if you failed to pay off a debt in the past here in the UK.

In general, it is common sense to make sure that you can repay any money that you borrow - what seems like a good idea now, you may regret tomorrow. 

By John Hillman

USEFUL WORDS

apply for a loan = make a formal request, usually in writing, for a loan
repay a loan = to pay back money that you have borrowed
interest = the extra money that you pay back when you borrow money
to owe money to someone = to have to pay someone for something that you have received or return money that you have borrowed
overdraft = the amount of money that you owe to a bank when you have spent more money than is in your bank account
APR (Annual Percentage Rate) = the amount of interest a bank charges on money that it lends, calculated over a period of a year
secured loan = a loan guaranteed on property if you are unable to repay it
non-secured loan = a loan which does not require any guarantee
credit rating = a judgement made by a bank about how likely someone is to pay back money that they borrow, and how safe it is to lend to them
creditworthy = able to be trusted to pay back money that is owed / safe to lend money to

ENGLISH GRAMMAR

Borrow vs Lend

You borrow something from someone, while they lend it to you.  Borrowing is like taking, lending is like giving:

I borrowed Tom’s car last weekend
I asked Tom to lend me his car last weekend
Tom lent me his car last weekend

Can I borrow your pen?
Can you lend me your pen?
She lent me her pen

I’ll lend you some money if you want
Could I borrow £20?