There are many loans currently on offer in the marketplace for a variety of purposes. The terms of loans available differ depending on the company offering them but it is possible to find deals that suit those on a restricted budget. Rates vary wildly and can depend on the type of loan, the borrowers credit history and the amount borrowed.

Loans can be ‘secured' and ‘unsecured' and are offered by banks, supermarkets building societies and loan companies. Secured loans tend to be more affordable than unsecured loans. This is because with a secured loan the borrower provides an asset to the lender. If an individual cannot make the loan repayments then the loan company will claim the assets and sell them to recoup their losses. This would mean that if an individual offered their house as an asset and stopped repaying the loan it would be taken and sold.

Lenders charge less for secured loans because they are more likely to recover losses if the borrowers default. Secured loans are consequently seen as less risky options for lenders and they can even be offered to those who have a poor credit rating.

Those with particularly low credit scores may face higher interest rates initially. However if the loan is paid back without default the credit score could improve and lead to better terms on further loans. Individuals should be aware that if their finances allow them to pay back a loan early there could be a penalty.

Unsecured loans do not have assets attached to them and if payments are discontinued then the loan company is likely to take legal action. They are usually offered to those with a high credit rating and are more costly and are not generally perceived as the more affordable option.

Borrowers can save money on low cost secured loans because their interest rates are less than unsecured loans. Due to the lower risk factor compared to unsecured loans individuals can borrow large amounts of money. Some lenders offer 125% of the value of a client's home. Secured loans are also easier to acquire especially for those with poor credit ratings and individuals seeking to consolidate their debt.

When applying for a loan the terms offered by the lender depend on factors such as the lenders age, job, credit rating and assets. Interest rates can vary from company to company and it is worth researching the best option. Generally individuals can borrow amounts from a few thousand to a hundred thousand. The repayment period depends on the borrowed amount and the budget of the borrower. High amounts are usually repaid over a 25-year period.

To save costs it is recommended that individuals repay their loan over the shortest period possible. The quicker the loan is paid back the less interest is accrued. Some loans offer a degree of flexibility in which the borrower can choose when to make repayments. These are often accompanied by a higher interest rate.

Consideration should be given to the fact that interest rates can rise significantly in a short period of time and this can affect their monthly budget. There can also be penalties if repayments are not paid on time and this can lead to a considerable rise in interest rates

Some borrowers do not yet own all the equity in their home and are still paying a mortgage. However they can still use their home for obtaining a low cost secured loan. In this situation a mortgage provider is referred to as a ‘first charge'. If a borrower offers the house as further equity to another lender they are called the ‘second charge'.

Second charges normally raise their interest rates to reflect that they are second in line to claiming assets should payments cease. Individuals should be aware of this increase in rates when applying for their loan and find the most affordable option. Some lenders will complete a valuation of the property which investigates whether the house has adequate equity within it should the second charge need to claim. Individuals applying for a low cost loan may find that loan companies are willing to be a second, third or fourth charge although interest rates will reflect their position.

Borrowers normally repay their loan monthly at an amount discussed with the lender. Some individuals benefit from a ‘repayment holiday' which is a fixed length of time in which no loan payments are made. This tends to be for several months and often scheduled for the beginning of the loan agreement. If a borrower wishes to cancel a loan they have seven days to do so if the loan is under £25,000.

Borrowers have the option to protect against repossession of their home by taking out insurance. This would protect their home if they were unable to make payments for a variety of reasons. Individuals should balance their budget carefully to find the most affordable options. Payment protection is usually added to monthly premiums although rates can be costly and some borrowers avoid it.

Low cost secured loans can be brought online, in supermarkets, from banks, building societies and directly from loan companies. Some low cost loans have initial low prices that rise sharply. It is recommended that the annual percentage rate is checked so monthly premiums do not go beyond the budget of the borrower.