Only working people can take loans in the UK. Below is the information that will help you to find themselves in the intricacies of loans:
- The most popular type of mortgage in the UK. Borrowed capital with interest is repaided in monthly installments over the entire duration of the loan. The amount of capital repaid will grow gradually over the years, and thus the amount of interest repaid decreases. Over the years our share of the purchased property grows. This type is one of the safer loans. Almost always we are sure that we pay it in full.
Interest only mortgage
- The loan is characterised by only a repayment of interest on the loan. Payments are made in monthly installments for the entire duration of our loan. Repayment of capital, on the other hand, is the monthly payment of money for long-term investment or savings plan. After a specified time, the refund should be high enough that we can easily repay the whole loan. Unfortunately, there are cases that we lose the invested money. In this case, we need to think about other ways of repaying the loan. Interest only mortgage is divided into:
- Endowment mortgage: The loan consists of two parts: a bank loan and life insurance of insurance company. We monthly repay only and solely interest, and also pay the insurance premium. At the end of the lending period collected money are sufficient to cover the loan. There is a small chance that the value of investments in the market will fall, and we will have to pay extra to repay the entire debt.
- Pension mortgage: The loan is targeted primarily towards self-employed people. Monthly we bear the costs associated with the interest rate and pensionable pay. When you reach retirement age, our contributions will be sufficient to cover the entire loan and the payment of pensions.
- ISA mortgage: The loan, where we repay only and solely interest on the loan and pay the appropriate amount of money for individual savings account. As in Pension mortgage and Endowment mortgage, the collected amount of money will help you to repay a bank loan.
Specifications of the loan
- Flexible mortgage
Flexible mortgage allows us to make changes in monthly payments according to our current financial situation. This option allows us to early repayment of the loan. Moreover, flexible mortgage allows you to: monthly overpayment of the loan, more cash payments, partial repayment of installments, the release of the repayment of installment (credit vacation), additional loan without the consent of the bank, etc.
- Offset mortgage
In this case, the amount of money that we have to pay to the bank is dependent on the state of our current or savings account.
- Current account mortgage
It is a similar form similar to an offset mortgage. But there is no separation between current account / savings account and credit. The whole is treated as a debit.
Calculating interest rates
- Standard Variable Rate
The loan has a variable standard rate, and thus the amount of money that we have to pay is dependent on fluctuations in the base rate of the National Bank of Britain. They are typically from 1% to 2% higher. In fact, the rate varies throughout the term of the loan, as it is in line with the base rate. In practice it is that repayment of the loan will be less if interest rate will fall, in the opposite case, we will pay the greater credit. This type of loan allows you to change the lender.
- Tracker Rate
In this case, the interest rate is dependent on the base rate of the National Bank of Britain.
- Fix Rate
The loan with a fixed interest rate is ideal for those, who are uncertain about changing interest rates. The longest period of fixed interest rates in most banks is 5 years. The interest rate will be unchanged despite the changes in the base rate. This option is ideal for people, who take quite a sizeable loan. After the initial period (2 – 5 years) you switch to a standard variable interest rate.
- Capped Rate
The loan for which the interest rate may fluctuate, but cannot exceed a certain value for some time. Some banks have established percentage rates, which cannot be exceeded. This option has a higher APR, although it is much more secure (we always know what to expect).
- Discount Rate
The loan with low rate of interest, for which the interest rate is lower than the current variable rate. Of course this solution is only temporary – a certain period usually takes two years. After this time the rate becomes variable. The monthly installment may change, because the rate of interest is dependent on the base rate of the National Bank of Britain.
Of course you can also take advantage of companies offering loans, but we must reckon with the fact that the interest rate will not be the most attractive. Here are a few companies offering loans already on the second day: wageme*, maxcashadvance*. You should also consider a social loan on Zopa* website. Keep in mind that loans contribute to impoverishment. The situation is different, because we use the loans for investment purposes.
For those, who are forced to take a fast loan (these loans are unfortunately subjected to such a high percentage) I prepared a form on the fast loan website.