In these days of saturation marketing the temptation to have that new, top of the range car or latest household appliance is greater than ever. But what if the cost of the item you are after is more than you can afford? Taking out a loan is the most enticing option for many people; it gives you the money upfront and breaks down the repayments into manageable chunks that you can pay back over years. But you need to be very careful when embarking upon a loan that you are fully aware of the facts. Rates and conditions vary considerably between different types of loan and if you plump for the wrong one it could have very negative consequences.

The type of loan you are most likely to get is a secured loan. This means that the borrower has to provide the lender with security against the amount they are borrowing and this security will generally take the form of the borrower's property. If the property is mortgaged the loan is known as a second charge while if it is owned outright it becomes a first charge.

The amount you borrow can be pretty much whatever you want it to be. There are loans available of as little as £500 and as much as £100,000, although be warned that regulations only apply on loans of up to £25,000. Borrowing beyond that amount is decidedly risky as you have no legal framework of rights to fall back on and you are entirely at the whim of your lender. Similarly the repayment period can vary, generally from six months to fifteen or twenty years, although the amount you pay back each instalment is more likely to be fixed to a specific sum.

Obviously the lender is going to charge you an interest rate otherwise there would be nothing in it for them. This is called the Annual Percentage Rate or APR and needs to be analysed very carefully. APR's vary wildly from 6% to 20% so it is vital to shop around but even then you might not get the deal you envisaged. Many lenders bang on about ‘low typical APRs' but more people than you might imagine turn out to be ‘atypical.' Basically the ‘typical APR' covers 66% of the country's population leaving roughly a third of the nation who are not entitled to it. If you have bad credit or County Court Judgements in your past then that figure may well include you.

Another thing that you need to be wary of is the duration of the repayment schedule. If you borrow a fiver from a friend then the best course of action is to pay that money back at the first opportunity. This is not the case with secured loans. The length of time it takes to pay back the loan is set very deliberately by the lender to get as much interest as possible out of the borrower. If you suddenly find that you can pay back your loan in a couple of weeks that is not going to endear you to your lender as they will be missing out on all the extra interest that would build up over a longer period. To guard against this many lenders will slap an Early Repayment Charge on you, which would typically be the equivalent of one or two months interest, should you pay back the loan early.

Beware also of Payment Protection Insurance or PPIs. Whilst this makes sense in covering your repayments in the case of sickness, accidents or death the amount charged for it can be astronomical and out of all proportion to its benefits. Again do your homework before you commit to it.

The above warnings may make it seem like it is always a bad idea to get a secured loan but that is not the case. If you take the requisite time and attention to find exactly the right loan for you then they can be the perfect answer to a lot of problems. For example, if you have a number of debts in different places it can make sense to consolidate them into one debt with a fixed APR, thus making it easier to manage and keep track of. There are also flexible deals out there if you are prepared to look for them with variations in the amount you pay each month or the ability to defer payment for a period of time. It is advisable to check the interest rates here though, as if it sounds too good to be true it probably is.

Regulations are in place to help you as well (if you are borrowing £25,000 or under.) The Consumer Credit Act 1974 specifies complete transparency on the part of the lender with full disclosure of the total amount of the loan and the APR. The borrower is also entitled to a copy of the credit agreement and a cooling off period of fourteen days.