Young or old, at some point in our life, most of us will apply for some kind of loan. So what are the pros and cons? Whether finance is required over a long or short period, personaland business loans can make life easier. A business loan can mean the difference between a success and failure, whilst a personal loan can provide a much-needed holiday, a new fridge or cover an unexpected situation. What is important however, is to ensure that you get the right loan for the right circumstances; if you don’t, you could be storing up future problems.

Personal loans should not be used for a business and similarly, business loans should be used to sustain the cash flow and further the development of the business concerned.

Loan availability

According to the Bank of England’s latest quarterly report, lending to small and medium-sized business is increasing, though not by very much. Getting a business loan from a high street bank may not be as easy as it once was. Business loans are often structured to match the likely profitability of the business; this sometimes makes them difficult to obtain. Personal lending, whether you are after an overdraft or a personal loan, is improving; albeit more slowly than was hoped. Both personal and business loans require that certain criteria be met before a loan can be issued.

Very short-term loans

Very short-term loans, or “payday loans” are very easy to obtain but must be used for their intended purpose; as a ‘short term’ loan. If payday loans are not paid off when they should be, they can become very expensive indeed. The high rate of interest, whilst perfectly manageable for a week or so, is completely unsuited to longer term borrowing. You should also look out for hidden fees and unexpected charges. Make sure that everything is made absolutely clear before you complete the loan application.