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Types of Credit, Including Credit Cards, Personal Loans, and Mortgages

Do you know what types of credit are available and how they can be used? In this article, we will explore the different types of credit available, including credit cards, personal loans, and mortgages.
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Credit has become an integral part of modern life - whether you are buying a home, financing a car, or just trying to build up your credit score. 

But do you know what types of credit are available and how they can be used? In this article, we will explore the different types of credit available, including credit cards, personal loans, and mortgages. 

Credit cards

Credit cards are the most popular type of credit in the UK. In fact, 68% of adults in the UK have at least one credit card and 46% of these card holders have more than one card.

There are many different types of credit cards, but they can generally be grouped into two categories: revolving credit cards and charge cards. 

Revolving credit cards allow cardholders to borrow money up to a certain limit and carry a balance from month to month. Charge cards require cardholders to pay their balance in full each month.

Here are some of the most popular types of credit cards:

  • Secured credit cards: A secured credit card is backed by a deposit you make with the issuer. The deposit is typically equal to your credit limit, so if you deposit £500, you’ll have a £500 credit limit. Secured cards can help you build or rebuild your credit history.

  • Unsecured credit cards: An unsecured credit card doesn’t require a deposit. Unsecured cards are available to people with good or excellent credit.

  • Prepaid debit cards: A prepaid debit card is not a credit card, but it can be used like one. You load money onto the card in advance, and then use it to make purchases or withdraw cash. Prepaid debit cards can help you stay within your budget since you can only spend the money you’ve loaded onto the card.


  • Credit cards can be a convenient way to make purchases. 

  • Some credit cards can also help you build your credit history.

  • Credit cards may come with low APRs if you have a good credit score.


  • Credit cards can have high interest rates and fees, and can be easy to overspend with.

Personal loans

Personal loans are another type of credit that can be used for a variety of purposes, including consolidating debt, financing a large purchase, or paying for unexpected expenses. 

Personal loans typically have fixed interest rates and monthly payments, making them easier to budget for than revolving credit products like credit cards.

With a personal loan, you borrow a fixed amount of money and repay it over a set period of time, usually two to five years. The interest rate on a personal loan is also generally fixed, so your payments will stay the same throughout the life of the loan. 

This can make budgeting easier, but it also means you’ll pay more in interest over time if rates go down.

Personal loans are typically unsecured, which means they’re not backed by collateral like a car or house. This makes them riskier for lenders, which usually results in higher interest rates than secured loans.

Personal loans can have origination fees, which are typically 1-5% of the loan amount. These are charged by the lender to cover the costs of processing and originating the loan.

Before you take out a personal loan, make sure you understand all of the terms and conditions. Pay close attention to the interest rate, fees, and repayment schedule. And remember, personal loans are not always the best option – sometimes it makes more sense to use credit cards or tap into savings.


  • Personal loans can help you consolidate debt or finance a large purchase. 

  • They usually have lower interest rates than credit cards.


  • Personal loans can have origination fees and may require collateral. 

  • You may also need good credit to qualify for the best rates.


Mortgages are the largest type of loan in the UK and are used to finance the purchase of a home. Homeowners typically make monthly payments on their mortgage, which include both principal (the amount borrowed) and interest (the cost of borrowing the money). 

Mortgage payments usually continue until the loan is paid off in full or the home is sold.


  • A mortgage can help you buy a home of your own.

  • Mortgage interest rates are typically lower than other types of loans.


  • A mortgage is a big loan that comes with a long-term responsibility. 

  • Failing to meet your repayments could result in your home being repossessed.

Other types of credit

There are many other types of credit besides credit cards, personal loans, and mortgages. Some examples include lines of credit, car loans, student loans, and more. 

Each type of credit has its own terms and conditions, so it's important to understand the difference before borrowing. Here are a few other types of credit:

  • Lines of credit are a type of revolving credit, which means you can borrow up to a certain limit and then pay back what you've borrowed over time. 

  • Car loans are another common type of loan, used to finance the purchase of a new or used vehicle.

  • Student loans can be used to cover the cost of tuition, room and board, books, and other expenses related to your education.

Other types of credit may have different purposes or be better suited for specific needs. It's important to do your research before borrowing to make sure you're getting the best deal for your situation.

How to choose the right type of credit for you

There are many different types of credit available to consumers, and it can be confusing to try to choose the right one for your needs. 

Here are some things to consider when choosing the right type of credit for you:

  • What is your credit score? Your credit score will affect the interest rate you qualify for on any loan or credit card.

  • What is your income? This will determine how much you can afford to repay each month.

  • What is your debt-to-income ratio? This is the amount of debt you have compared to your income. A higher ratio means you have more debt and may have a harder time qualifying for new credit.

  • What are your financial goals? Do you need to consolidate debt, build up your credit history, or make a large purchase? There is a type of credit that can help you achieve each of these goals.

Once you've considered all of these factors, you'll be able to narrow down the type of credit that's right for you. If you're still not sure, speaking with a financial advisor can help give you clarity on which options will work best for your unique situation.


Credit can be a great tool for individuals to use when it comes to achieving their financial goals. There are many different types of credit available, including credit cards, personal loans, and mortgages. 

It is important to do your research and understand the differences between each type of credit before deciding on which one will work best for you. With careful planning, you can make sure that taking out any type of loan or opening a line of credit won't lead to financial problems down the road.

For information and support to aide you in achieving your financial goals Money Helper is a free service set up by the Government to help people make the most of their money. Click here if you would like to learn more about Money Helper and their services

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