Loans explained

Bankers acceptances are effectively low-cost, short-term loans used to cover temporary business costs – but if you’re looking to take out a short-term loan in order to fund a goods shipment or inventory then it’s a good idea to consider all the options. In some circumstances, the following loan types may be more suitable.

Secured loans: If you’re looking to borrow money on a long-term, low-interest basis then a secured loan may be your best option. As the name suggests, secured loans are secured against a valuable asset such as a house and are available both to private individuals and to businesses. The security experienced by the lender means that these types of loans are generally obtainable at low interest rates – but bear in mind that if you fail to repay the amount borrowed then your creditors can claim the collateral.

Unsecured loans: If you don’t own anything of value or if you’re concerned about offering your home as collateral against a debt, then one option could be an unsecured loan. While unsecured loans are generally considered to be low-risk for the borrower, they do tend to be smaller and charge higher levels of interest. It’s also important to remember that many lenders will seek legal redress for unpaid unsecured loans – so they should not be seen as entirely risk-free.

Government loans: The US federal government has a number of programs on offer which are designed to stimulate fiscal growth through lending to businesses. These include low-interest loans and grants – so if you’re looking for financial support then it’s worth checking out the federal schemes before applying to a bank. If you’re based in Europe then many European governments also offer loans. Bear in mind that some of the best rates on loans, such as those offered by banking group Santander (who offer loans with a rate of 8.9% typical APR on balances of £7,500 – £14,950 on their website) are only available outside of the US.

Debt consolidation loan: There are various loans available to individuals are businesses who are in debt. The most common are debt consolidation loans, which aim to make a scattered debt more manageable by combining several loans into one. They can potentially lower monthly repayments by reducing interest rates and increasing the pay-back period. However, if you or your business is in debt then make sure that you get appropriate help as well as looking at consolidation options.

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