Understanding Loans

It is vital that you think carefully before taking out any form of credit.

When you apply for a loan, a responsible lender will carry out an affordability check with you, taking into account your income and expenditure to ensure you can afford to repay the loan.

Top tips

  1. Don’t rush.
  2. Think carefully.
  3. Ask for advice.

The lender will advise you of the amount of weekly/monthly repayments along with the consequences of non-payment and any additional charges or fees that could be added to the amount you borrowed.

If you are struggling with your money and need help budgeting then contact us and we will be able to help.

What you need to know

The main things to consider when shopping around for credit are:

APR = the ‘Annual Percentage Rate’. This is rate of interest you have to pay back every year, on top of the money you have borrowed.

Term = the length of time you will be paying the loan back for.

Affordability = whether or not you can afford the regular repayments. Any missed payments will be noted on your credit file and could affect any future loans you apply for.

Check = you need to check that the lender is authorised by the Financial Conduct Authority (FCA). This can be done on the FCA website.


Download our factsheet here.

Types of credit

We have a very useful factsheet with a table explaining the different types of credits.