Loans are basically made up of two main components which are a good way of telling them apart and helping you to assess whether the product on offer is right for you. These are the APR and the security required.

APR stands for 'annual percentage rate' and it represents the fee that you will be charged on top of the amount that you originally borrowed. APR comprises both interest and any additional charges such as arrangement fees. Your APR will be charged at either a variable or fixed rate. Variable rates often appear lower at first but do not come with the guarantee that a fixed rate loan offers. Variable rates are subject to fluctuation with market changes, so it is important to think about both your short and long-term goals when considering which type of APR is right for you. You can read more about APR here.

Another way in which loans vary is in the way they are arranged. Loans can be either secured or unsecured. If you apply for a secured loan then you will ask to put up some collateral as security for the loan. Collateral most often comes in the form of free equity in property. With secured loans, if you fail to keep up your loan repayments as agreed then your property will be at risk. It is possible to have more than one loan or mortgage secured on the same property.

Read more about UK personal loans