Types of loans
Borrowing is a big commitment. Whether for personal needs or business growth, understanding the mechanics of your loan is crucial.
Comparing finance
Always look at the representative APR, fees, and the overall total amount repayable.
Example
For a £10,000 personal loan, comparing the total repayment versus the monthly payment is a critical distinction.
Core borrowing products
Personal loans
Unsecured, fixed-rate loans for individuals.
Business loans
Funding facilities structured specifically for corporate growth.
When to borrow
Borrowing usually makes sense for:
- 1
One-off investments
Costs that deliver long-term value.
- 2
Debt consolidation
Simplifying expensive credit into a cheaper, single payment.
Lender requirements
Most lenders need:
Solid history: Evidence of stable income and a clean credit record.
How to compare loan options
Follow these steps to make an informed choice:
- 1
Check the APR
Look for the representative APR but note that it might not be the rate you get.
- 2
Check flexibility
Look for options that allow for early repayment.
Pros and Cons
Pros
- Fast access to capital
- Fixed terms for clear budgeting
- No equity loss
Cons
- High-interest costs
- Risk to credit file if missed
- Possible asset risk for secured loans
Why borrow?
When used responsibly, loans are a powerful tool to bridge cashflow gaps or accelerate major life or business projects.
Potential risks
Engaging with taking on debt requires care to ensure you don't overpay or miss critical protections.
For energy, failing to switch or manage your smart meter can lead to higher costs. For finance, errors on your report can lead to loan rejections.
Always use verified, independent sources like Ofgem or regulated financial services to compare options.
Alternatives
Look beyond loans:
Savings
Using personal savings is always the cheapest form of borrowing.
FAQs
About this guide
Written and reviewed by the Grow Your Business team, and kept up to date as rates, rules and provider terms change.
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