Loans
A loan is money you can borrow from:
- a bank
- the government
- a business
- another organisation
Loans must be paid back on an agreed schedule. A loan may have some interest added.
If you don’t pay back your loan on time, it can affect your credit score.
When you take out a loan, it is important to do so from the right places.
Banks are often the safest option, but not everyone can get a loan from a bank.
You should check with your bank to see if they can offer you a loan.
There are many ‘payday loan’ companies who will lend money to people, but they often charge a lot of interest.
Anyone who gives you a loan must be authorised by the Financial Conduct Authority (FCA).
You can learn more about the dangers of borrowing money from the Citizens Advice website.
Interest
When you take out a loan, you usually pay interest.
Interest is an extra amount you must pay for borrowing the money.
The amount of interest you pay is usually a percentage of the amount of money you've borrowed. This is called an 'interest rate'.
You can learn more about interest rates on the Bank of England website.
Credit score
A credit score measures how likely you are to pay back money you borrow.
When you apply for a loan at a bank, the bank may check your credit score to decide whether to give you the loan.
You can learn more about credit scores on the Lloyds Bank website.
Government loans
Budgeting loan
The government may give you a loan of between £100 and £810 depending on your personal situation.
This loan is to help you with things like:
- furniture
- clothes
- maternity costs
You can check if you’re eligible and apply for a budgeting loan on the GOV.UK website.
Start-up loan (business)
If you want to start a business, the government may give you a loan of between £500 and £25,000 to help you.
You will need to have a good credit score to pass a credit check.
You can learn more and apply for a start-up loan on the GOV.UK website.
Student loan
The government may offer you a loan to help pay for university or college tuition fees and living costs.
You can learn more about student finance on the GOV.UK website.
