{"id":7064,"date":"2024-02-05T09:40:43","date_gmt":"2024-02-05T07:40:43","guid":{"rendered":"https:\/\/moneyhub.ee\/?p=7064"},"modified":"2025-04-22T13:52:00","modified_gmt":"2025-04-22T11:52:00","slug":"loans-guide","status":"publish","type":"post","link":"https:\/\/moneyhub.ee\/en\/useful\/articles\/loans-guide\/","title":{"rendered":"Nearly everything you need to know about loans"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7064\" class=\"elementor elementor-7064\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-5d7efb58 e-flex e-con-boxed e-con e-parent\" data-id=\"5d7efb58\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-32d40bf6 elementor-widget elementor-widget-shortcode\" data-id=\"32d40bf6\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"shortcode.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-shortcode\"><nav aria-label=\"breadcrumbs\" class=\"rank-math-breadcrumb\"><p><\/p><\/nav><\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-1e4750ba e-flex e-con-boxed e-con e-parent\" data-id=\"1e4750ba\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t<div class=\"elementor-element elementor-element-a047e75 ddddf e-flex e-con-boxed e-con e-child\" data-id=\"a047e75\" data-element_type=\"container\" data-e-type=\"container\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-20c9d99a elementor-widget elementor-widget-heading\" data-id=\"20c9d99a\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Nearly everything you need to know about loans<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-18b94166 e-flex e-con-boxed e-con e-parent\" data-id=\"18b94166\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-13e8adb2 elementor-widget elementor-widget-image\" data-id=\"13e8adb2\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img fetchpriority=\"high\" decoding=\"async\" width=\"2240\" height=\"1260\" src=\"https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5.png\" class=\"attachment-full size-full wp-image-7066\" alt=\"Nearly everything you need to know about loans\" srcset=\"https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5.png 2240w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-300x169.png 300w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-1024x576.png 1024w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-768x432.png 768w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-1536x864.png 1536w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-2048x1152.png 2048w\" sizes=\"(max-width: 2240px) 100vw, 2240px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-19d502c4 e-flex e-con-boxed e-con e-parent\" data-id=\"19d502c4\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-2dd9045 elementor-widget elementor-widget-heading\" data-id=\"2dd9045\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Borrowing money as a loan can be used for almost anything, from little emergencies to long-term purchases like a home. Before you take out a loan, read how they work, what they cost and what borrowers should consider before applying for a loan.<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-175f64b5 elementor-widget elementor-widget-text-editor\" data-id=\"175f64b5\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Borrowing money in the form of a <a href=\"https:\/\/moneyhub.ee\/money\/loans\/\">loan<\/a> can be used for almost anything: emergencies, healthcare, home improvements, debt consolidation, big one-off purchases, and unexpected bills.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Before you take out a loan, read how it works, what it costs, and what borrowers should consider before applying.<\/span><\/p><p><span style=\"font-weight: 400;\">In this guide, we\u2019ll cover:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">How loans work and what types of loans are available<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">What are the costs for borrowing and understanding APR<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">How to repay your loan and the impact a loan has on credit scores<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Let\u2019s get started!<\/span><\/p><h3><span style=\"font-weight: 400;\">How does a loan work?<\/span><\/h3><p><span style=\"font-weight: 400;\">If a borrower applies for a loan and is approved by the lender, the lender will transfer the money directly into the applying borrower&#8217;s bank account.<\/span><\/p><p><span style=\"font-weight: 400;\">Borrowers then repay the loan, usually every month, until the balance is cleared. Borrowers should decide how long they need to repay the loan before they apply.<\/span><\/p><p><span style=\"font-weight: 400;\">With most loans, borrowers can decide to spread their payments over one month to five years, with some allowing borrowers to repay more quickly to save them money or spread their payments over a more extended period. Loans that are repaid for more than one year are generally known as <\/span><i><span style=\"font-weight: 400;\">short-term loans<\/span><\/i><span style=\"font-weight: 400;\">. Long-term loans or personal loans are more than a year.<\/span><\/p><h3><span style=\"font-weight: 400;\">What types of loans are there?<\/span><\/h3><p><span style=\"font-weight: 400;\">There are several different types of loans, so which loan is best?<\/span><\/p><p><span style=\"font-weight: 400;\">Well, they all fall into one of two categories:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Secured loans<\/b><span style=\"font-weight: 400;\"> are tied to an asset a borrower owns like their property (<a href=\"https:\/\/moneyhub.ee\/insurance\/home-insurance\/\">house<\/a>, <a href=\"https:\/\/moneyhub.ee\/insurance\/car-insurance\/\">car<\/a>, business). They usually are far more considerable sums and repaid over longer periods<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Unsecured loans<\/b><span style=\"font-weight: 400;\"> are not directly tied to any of the borrower&#8217;s belongings. They are used when people wish to borrow smaller amounts and generally last between one and five years<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Unsecured loans can also be broken down into various types: short-term, payday, and personal<\/span><i><span style=\"font-weight: 400;\">. <\/span><\/i><span style=\"font-weight: 400;\">Other terminology borrowers will hear are the following:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Payday loans<\/b><span style=\"font-weight: 400;\"> are loans with extremely high-interest payments. It is a short-term loan that is offered through a business and not a bank<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Short-term loans<\/b><span style=\"font-weight: 400;\"> are scheduled to be repaid in less than a year. Typically with a high interest rate<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Debt consolidation loans<\/b><span style=\"font-weight: 400;\"> are new loans to pay off existing debts. Effectively multiple debts are combined into a single, larger debt, usually with better repayment terms like lower monthly repayments and a lower interest rate\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Instalment loans<\/b><span style=\"font-weight: 400;\"> are a loans that are repaid over time with a set number of scheduled payments; until the loan is repaid in full<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Same day loans<\/b><span style=\"font-weight: 400;\"> a loans where an applicant applies for a loan, receives a decision, and, if approved, receives the money transfer all on the same day\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Fast cash loans<\/b><span style=\"font-weight: 400;\"> are a loans that applicants can apply to receive funds into their account directly and quickly, being typically processed within one hour.\u00a0<\/span><\/li><\/ul><h3><span style=\"font-weight: 400;\">Where can you get a loan?<\/span><\/h3><p><span style=\"font-weight: 400;\">Loans are not only available at major banks or high street financial institutions. People can apply for loans everywhere, including:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">banks &amp; building societies<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">charities<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">credit unions<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">government<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">peer-to-peer borrowing websites<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">short-term lenders (payday loan companies)<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">supermarkets<\/span><\/li><\/ul><h3><span style=\"font-weight: 400;\">How much can people borrow in a loan?<\/span><\/h3><p><span style=\"font-weight: 400;\">With most loan types, borrowers could borrow between \u20ac100 and \u20ac25,000. However, some offer smaller amounts or much more substantial sums (like a homeowner loan or mortgage).<\/span><span style=\"font-weight: 400;\"><br \/><\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">smaller loans tend to be over shorter periods, usually a year or less<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">larger loans typically last at least three years but can be anywhere up to 25 years<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">The best rates for personal loans are in the <\/span><a href=\"https:\/\/moneyhub.ee\/money\/loans\/\"><span style=\"font-weight: 400;\">\u20ac7,500 to \u20ac15,000 range, with loan costs being around 3-9%.<\/span><\/a><span style=\"font-weight: 400;\"> Anything over that amount tends to command interest rates of around 10%.<\/span><\/p><p><span style=\"font-weight: 400;\">For <\/span><a href=\"https:\/\/moneyhub.ee\/money\/short-term-loans\/\"><span style=\"font-weight: 400;\">smaller loans<\/span><\/a><span style=\"font-weight: 400;\">, the average interest rate is typically higher.<\/span><\/p><h3><span style=\"font-weight: 400;\">What\u2019s the cost of taking out a loan?<\/span><\/h3><p><span style=\"font-weight: 400;\">Lenders determine the cost of borrowing money by calculating interest as a percentage. This amount is added to the loan a borrower repays in addition to the initial loan amount. The interest is typically calculated as an annual percentage as if the borrower repaid the amount over one year.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Interest rates are either variable or fixed. Fixed rates remain static during the loan agreement, whereas variable rates move both up and down. Since they are tied to a benchmark rate, they can fluctuate.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Lenders must display their interest rates annually, known as the <\/span><b>Annual Percentage Rate (APR)<\/b><span style=\"font-weight: 400;\">. The APR must include all the regular costs of obtaining a loan, including any other applicable fees charged by the lender.<\/span><\/p><p><span style=\"font-weight: 400;\">Lenders then display a representative APR before people apply for one of their loans. <\/span><b>Representative APR<\/b><span style=\"font-weight: 400;\"> is the interest rate that <\/span><i><span style=\"font-weight: 400;\">at least 51%<\/span><\/i><span style=\"font-weight: 400;\"> of successful applicants must receive when they apply for a loan from the lender.<\/span><\/p><p><span style=\"font-weight: 400;\">The lender could offer the remaining applicants a higher interest rate. Meaning that borrowers may not receive the advertised representative APR when they applied for a loan.<\/span><\/p><h3><span style=\"font-weight: 400;\">What other fees are included?<\/span><\/h3><p><span style=\"font-weight: 400;\">Most lenders charge borrowers interest (APR) when borrowers take out a loan and is the amount of money a borrower owes for the duration of their loan.<\/span><\/p><p><span style=\"font-weight: 400;\">Some lenders, however, also charge additional fees to the interest rate, including but not exclusively to:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">broker fees<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">additional fees for transferring funds faster<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">missed or late payment fees<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">payment protection insurance<\/span><\/li><\/ul><h3><span style=\"font-weight: 400;\">How are loans repaid?<\/span><\/h3><p><span style=\"font-weight: 400;\">With most loans, borrowers pay back the same amount each month because the interest rate is usually fixed for the loan&#8217;s duration. Repayments generally are the agreed amount (depending on the lending term and amount borrowed) and the accrued interest as per the interest rate the lender offers in the borrower&#8217;s application.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Most payments are made by either standing orders or direct debits that promise to repay the lender on a specific day each month.<\/span><\/p><p><span style=\"font-weight: 400;\">Short-term loans are also usually repaid through monthly instalments, though some can be paid back weekly or in bulk at the end of the month after a borrower\u2019s salary has been paid to them.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Repayments are managed through direct debits, standing orders or what is known as a <\/span><b>Continuous Payment Authority (CPA)<\/b><span style=\"font-weight: 400;\">. CPAs permit lenders to automatically collect the monies they are owed on scheduled repayment dates from a specified account as listed in the borrower&#8217;s application.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-31ac9f8c e-flex e-con-boxed e-con e-parent\" data-id=\"31ac9f8c\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t<div class=\"elementor-element elementor-element-55dc0a5a ddddf e-flex e-con-boxed e-con e-child\" data-id=\"55dc0a5a\" data-element_type=\"container\" data-e-type=\"container\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-5c085fdf elementor-widget elementor-widget-text-editor\" data-id=\"5c085fdf\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Taking a loan, or any form of credit, should never be a quick and unresearched decision. Failure to repay an unsecured loan, will result in additional interest and late fees added to the loan, making it harder to repay the balance owed.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Borrowing money as a loan can be used for almost anything, from little emergencies to long-term purchases like a home. Before you take out a loan, read how they work, what they cost and what borrowers should consider before applying for a loan.<\/p>\n","protected":false},"author":3,"featured_media":7066,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-7064","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles"],"acf":[],"blog_post_layout_featured_media_urls":{"thumbnail":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-150x150.png",150,150,true],"full":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5.png",2240,1260,false]},"categories_names":{"21":{"name":"Articles","link":"https:\/\/moneyhub.ee\/en\/category\/useful\/articles\/"}},"tags_names":[],"comments_number":"0","rttpg_featured_image_url":{"full":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5.png",2240,1260,false],"landscape":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5.png",2240,1260,false],"portraits":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5.png",2240,1260,false],"thumbnail":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-150x150.png",150,150,true],"medium":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-300x169.png",300,169,true],"large":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-1024x576.png",800,450,true],"1536x1536":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-1536x864.png",1536,864,true],"2048x2048":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2024\/02\/MoneyHub-Special-Reports-Images-5-2048x1152.png",2048,1152,true]},"rttpg_author":{"display_name":"David Bailey","author_link":"https:\/\/moneyhub.ee\/en\/author\/davidbailey\/"},"rttpg_comment":0,"rttpg_category":"<a href=\"https:\/\/moneyhub.ee\/en\/category\/useful\/articles\/\" rel=\"category tag\">Articles<\/a>","rttpg_excerpt":"Borrowing money as a loan can be used for almost anything, from little emergencies to long-term purchases like a home. Before you take out a loan, read how they work, what they cost and what borrowers should consider before applying for a loan.","_links":{"self":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts\/7064","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/comments?post=7064"}],"version-history":[{"count":0,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts\/7064\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/media\/7066"}],"wp:attachment":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/media?parent=7064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/categories?post=7064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/tags?post=7064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}