When it comes to personal finances, it can sometimes be hard to manage our everyday and monthly expenses. With a falling pound and rising costs, the simple fact is, we can struggle. And if we know something is going to need a large sum of cash, then freeing up the finances to pay for it can be a difficult task.

Sometimes we know we’re likely to need a cash injection for something that we’re looking forward to. That could be anything from an upcoming holiday, a wedding, even a special occasion or celebration. Sometimes though, we need to have money available for life’s unforeseen expenses such as emergency property repairs, medical bills, or even funeral costs. In these tough cases, everyday savings might not be enough to cover it.

Availability & Repayment

We live in such contradictory times that on one hand, we often need to cut back on our spending as we battle against price rises on most day to day things, yet we can also apply for cash loans that get approved within the hour for thousands of pounds. Your credit rating and repayment ability may affect your loan amount, but, in principle, there is money available.

As mentioned, your credit rating and repayment ability can either work for you or against you when it comes to borrowing money. But there are various different loan types that you can look at when you need that financial breathing space. From bank loans and personal loans to a loan against your car and several options in between.

Here, we have a list of three choices with some pros and cons for each so you can make an informed decision. However, whichever loan choice you decide to go ahead with, you should always be fully aware of the terms & conditions that come with it and ensure you don’t take on too much debt.

Bank Loan

This is probably our first thought when we look to borrow money. ‘Bank loan’ is often used as an umbrella term for any kind of loan, but an actual bank loan could be your first port of call if you have a good relationship with your bank or building society.

Bank loans cover virtually any amount you might need to borrow and can range from £1,000 up to £25,000 or even £50,000. And, with high street banks usually being seen as trustworthy institutions rather than fly-by-night lenders, using them for a loan could put your mind at ease over other types of lenders if you’re particularly cautious.

Another plus point is that because of the bank’s ability to fully screen and rigorously check all applications before funds are released, it can give you confidence that the bank accepts you’re credit worthy and capable of paying the loan back in full. That can almost be seen as a ‘seal of approval’ and bodes well for your overall credit score and future borrowing.

For all the plus points, there must, however, be some minus points. Firstly, the starting amount for most bank loans is usually £1,000. This can obviously be a drawback if you’re looking for a smaller loan sum as you should never borrow more than you need.

Also, typically, bank loan repayments are spread over a much longer period – anywhere from a year up to 5 years, which, again, may not suit your needs. Even if those repayment terms suit you, you often need to borrow more to get a favourable interest rate which isn’t a good start.

Payday Loan

Payday loans are not for the faint hearted. They’re a high interest, fast turnaround loan and are not strictly for general everyday expenses. Aimed more for emergency purposes such as unforeseen home or vehicle repairs, as its name suggests, the loan should allow you to make your critical payment before your next payday when it should be paid back in full.

If something unexpected does crop up and you’re safe in the knowledge that your next paycheck is coming, then a payday loan can be a sensible option. Decisions are made very quickly with loans available from £100 up to £1,000 or more, typically up to around £500. And because the loan amounts are kept relatively small, your debt could be over very quickly by paying it off in one lump sum.

While payday loan lenders do often check credit ratings, there is usually less emphasis placed on them as, by the very nature of the loan, it’s a short term loan option. The only real requirements for being approved are that you’re in full time employment, be a UK resident, be over 18 and have a UK bank account with a debit card. Depending on the lender, you may be required to confirm you own a mobile phone. This shows that you already have credit and are making regular payments.

However, beware very high interest rates on payday loans. If you fall behind on any of the repayments, the costs will increase. It’s also worth remembering that failure to repay the loan in its entirety will mean credit agencies will keep a record of the bad debt on file. As a result, this means it could make it harder for you to get any type of loan or credit in the future.

Logbook Loan

A logbook loan is probably the least known of these three options, but it’s often seen as a good compromise between the bank and payday loans. A loan against your car has become an increasingly popular option recently for a fast, yet secure loan for a larger sum and it’s easy to see why.

When applying for a logbook loan, all you’ll need to supply the lender is the vehicle registration document (also known as the ‘V5’ or ‘logbook’) to prove you legally own the vehicle. Your level of loan is then taken out against your car which is used as security.

Unlike other loan methods though, there are no formal credit checks made on you. This means if you have bad credit already or have been refused credit in the past, it won’t stop your ability to take out a loan against your car. And with loans available from £500 all the way up to £100,000, then your chosen loan amount is going to be available.

Getting a loan against your car has lots in common with a payday loan, but with more structure to the repayment methods and a more favourable level of interest. One of the main benefits is that a logbook loan is fast. Once applied for and approved, funds can typically be in your bank account on the same day, often within one hour.

Another bonus to a logbook loan is that you’re free to use your car just as you normally do. There are no restrictions on when you use your car or what you use it for. So whether it’s business, pleasure or a mixture of both, you can still continue to drive as you always have.

Remember, it’s still your responsibility to maintain the upkeep of your car as well as ensuring valid tax, MOT and insurance are all kept up to date. But, if you fall behind on your loan repayments, then you may be at risk of losing you car as it is the security against your loan.

How do I get started?

There are various other loan and money borrowing options available to you as well as the options listed here, but once you’ve made your decision about which loan is best for you, be sure that you understand the lender’s terms and conditions.

And make sure you understand your own responsibilities to make the loan repayments. It can be quite an undertaking when borrowing money, so check the facts of the loan itself, while checking your own figures to make sure the repayments are manageable so you don’t fall into bad debt.