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What are some of the different types of loans?

There are different types of loans, with different terms and uses, such as buying a home, or consolidating other debts.

Being clear about your reason for borrowing, as well as the finer details, can help you find the right loan for you.

Some types of loans you may come across include:

What is a secured loan?

Secured loans – also known as home loans or homeowner loans – allow you to borrow money against your home. 

Your home acts as 'security' for the loan. For example, a mortgage is a type of secured loan because the lender can repossess and sell the property if you’re unable to meet the repayments.

That’s why it’s important to think carefully about securing debts against your home. 

What is an unsecured loan?

Unsecured loans – also known as personal loans – allow you to borrow money from a lender, such as a bank. You’ll agree to make regular repayments over a fixed term – until the loan, plus interest, is repaid in full. Unsecured loans aren't tied to an asset, such as your home. 

They can be helpful if you want to borrow money for home improvements, such as a new kitchen, buy a car, fund a wedding or consolidate debts

What is a joint loan?

A joint loan is when you take out a loan with someone you trust, such as a partner, relative or friend. This can be a secured loan, such as a mortgage, or an unsecured personal loan. Credit cards, however, can’t be taken out jointly. Even if there’s an additional cardholder, the main cardholder is responsible for paying off the credit card.

Explore: Pros and cons of borrowing money together

What is a credit union loan?

A credit union is a co-operative where members combine savings to provide each other with credit. To be a member, you need to share a common bond with other members, such as living or working in the same area.

HSBC doesn’t offer credit union loans. 

What is a payday loan?

Payday loans are typically small, short-term loans, available online or on the high street. You’re usually given up to a month to pay back the money you borrow plus interest, which can be high. 

It’s important to understand the terms of the loan and what happens if you’re unable to pay it back. Ideally, you should consider alternative ways of borrowing before you borrow from a payday lender. If you’re worried about money, there is help available.

HSBC doesn’t offer payday loans.

What is a peer-to-peer loan?

Peer-to-peer (P2P) lending works by matching borrowers with lenders through P2P lending platforms. These platforms work like marketplaces – bringing together individuals or businesses that want to lend money, with those that want a loan.

Depending on the platform, you may not have the same protection as when you borrow in other ways. Some peer-to-peer platforms are regulated by the Financial Conduct Authority; others are not.

HSBC doesn’t offer P2P loans.

What is a bridge loan?

Bridge loans – also known as interim financing or bridging loans – provide short-term funding to help ‘bridge the gap’ during times when financing is needed but not yet available. For example, a bridge loan might help someone purchase a new home, while they wait for their current one to sell. 

HSBC doesn’t offer bridge loans.

What is a guarantor loan?

A guarantor loan is a type of lending where someone acts as a ‘guarantor’. This person guarantees to repay the debt if the borrower can’t afford to. For example, some lenders will only provide a loan to someone with poor credit if they have a guarantor.

HSBC doesn’t offer guarantor loans. 

Things to consider

Before taking out any type of loan, make sure you’re aware of all the fees and chargesAnd calculate your potential loan repayments to make sure you can afford them.