A loan is an amount of money you borrow from your bank, usually over a fixed period of time, which is repaid at regular intervals. Interest is charged and added to the original loan amount, and other charges, may apply to the loan as well. You need to check out the Annual Percentage Rate (APR) to find out how much your loan is really costing you.

There are several different types of loan and you should be aware of the differences before deciding which is best for you.

Unsecured loan: This type of loan is granted without any security. (Most credit cards and personal loans will be unsecured).

Secured loan: A secured loan is guaranteed against other assets that you have. The bank takes a formal charge over an asset you own. This means that if you fail to make loan payments on time then the asset may have to be sold as payment.

Fixed rate loan: The interest rate is fixed at the start so your repayments will stay the same for the life of the loan.

Variable rate loan: The rate of interest charged can go up or down, so the amount of your repayments could change.

All bank loans are regulated by the Consumer Credit Act. This means strict procedures are carried out and provides you with protection from unscrupulous lenders. You must be given information about a loan before you sign a loan agreement.

Before deciding whether to grant a loan the bank will check out your credit worthiness to satisfy your ability to repay any money you borrow.