Category: Loans

Loans

What is a Personal Loan and is it Right for me?

A personal loan is an unsecured loan, which means that there is nothing secured against it. Some loans have an asset such as your home secured against them, which means that you have to have something of value to secure against them before you can take one out. With an unsecured loan you do not need this, so if you are not a home owner and have nothing else of value you still will be able to get one.

About personal loans

Personal loans tend to offer borrowers over £1000 and require monthly repayments. The amount that you repay will depend on how much you borrow and how much you can afford to repay. The term of the loan may be able to be extended in order to allow you to make smaller repayments. The loan will last for longer and will be more expensive. This type of loan are offered by quite a lot of lenders so you will be able to compare them and see what different terms are available to see which you feel look more favourable to you. The interest is often fixed which means that you will know exactly how much you will be expected to repay for the loan. This means that you will be able to more easily budget so that you know that you can afford the repayments. The interest rate on the loan may change according to how much you choose to borrow. Sometimes if you borrow more the interest rate will be lower.

Who are they for

The loans are designed for those that need to borrow larger sums of money but have nothing to secure against a loan. As you can often borrow more than with a credit card, overdraft or payday loan then those applying for them will need larger sums of money. They can also be cheaper than other forms of unsecure lending but it is worth checking as prices will vary between lenders. They are designed to be used for all sorts of things and you will not need to explain why you want it. They can also be used to consolidate debt which can be useful if you have a lot of expensive debt that you want to repay.

Are they the right choice for me?

It is an individual decision as to whether this sort of loan will be the right choice. As with everything it is wise to compare the different types of lending available to you and see which looks like it will be most suitable. Compare prices as well as other features. You may find that a personal loan will allow you to borrow more money than a credit card or overdraft and it could be cheaper too. However, if you use it to repay another loan you need to make sure that you do not borrow more money before you repay it. For example, if you use it to clear a credit card, then make sure that you do not start accumulating credit card debt again while you are paying it off. Try to be disciplined and do not use the card or pay it off in full each month so that you do not accumulate more debt.

If you do have a home or other asset then it might be cheaper to get a secured loan instead. However, it is worth considering the risk of this. You need to think about whether you will be able to make the repayments. If you skip some repayments then the item that you have secured against the loan could be repossessed. This means that you will lose it. If this is a home or car then this could have a huge impact on your life. Although not repaying any loan will have repercussions it is less risky with regards to losing items of value if you have an unsecured loan. They are more expensive as a result but you may think that it is worth it for the peace of mind. If you miss repayments then you can choose to sell items you own to pay for it rather than being forced to have your home or car sold.

It is always wise to think about whether you really need a loan at all. It might be best to try to manage without one as it would be a lot of cheaper. Of course, sometimes it is in our interest to get a loan or we cannot manage without one. Then it is important to choose the right loan at the right price so that we get exactly what we need. This is why you need to understand what a personal loan is so that you can decide whether it seems like the right loan for you. Then you can compare the different personal loans available and choose the one that is the most attractive to you.

Loans

What Are the Different Types of Loan?

A loan is a sum of money that you can borrow from an institution with the intention of paying it back, either over time or all in one go. Usually, you’ll need to pay back the amount that you have borrowed with interest. Loans are typically offered in a fixed amount, and the exact amount that you borrow will depend on a number of different factors, from how much you need, to how much your credit history allows you to reasonably ask for.
There are many different types of loan available, and knowing your loan options will help you to make more informed decisions about the type of cash you need to access when meeting your goals.

Closed-Ended and Open-Ended Loans

Let’s start by looking at closed-ended and open-ended loans. With open-ended loans, you can borrow money over and over again without incurring problems, so long as you continue to pay off the amount you owe. Lines of credit and credit cards are some of the most common types of open-ended loan. Both of these come with a credit limit which represents the maximum amount any person can borrow at one given time. Every time you purchase something, your credit will decrease, and as you make payments into your credit card, your available credit will increase.

Closed-ended loans, on the other hand are loans that can’t be accessed again once they have been repaid. When you make payments on a closed-ended loan, the balance of your loan will go down. If you want to borrow more money, you’ll need to apply for another loan and pay it off all over again. An example of a closed ended loan might be a car or student loan.

Unsecured and Secured Loans

Now that you understand the concept of unsecured and secured loans a little better, you should be able to further understand the nature of secured and unsecured loans. Secured loans are the loans that rely exclusively on an asset as collateral for the overall loan. In the event of a default on the loan, the lender will be able to take possession of the asset and use that as value to cover the loan. Secured loan interest rates can be lower than the interest rates for unsecured loan because the lender will have some form of protection.

Of course, in order to get a secured loan properly, you may find that the asset that the loan is being taken out against needs to be assessed by an appraiser so you can determine its full value before accessing your loan. A title loan may be one of the most common examples of a secured loan.

On the other hand, unsecured loans don’t require any kind of asset in place for collateral. Instead, these loans may be more difficult to get, and generally come with higher interest rates because the lender doesn’t have any kind of security. Unsecured loans rely completely on the reliability of your credit history and your current income, and these numbers are used to determine whether you are trustworthy enough to lend to. If you default on your unsecured loan, then your lender will have to exhaust a range of collection options, and may also give your details to debt collectors to try and recover the money they are owed.

What’s a Conventional Loan?

When it comes to loans and lending, one of the most common areas to address is that of the mortgage. The term conventional loan is generally used for mortgages, and this term also refers to any loans that are not insured by a government agency such as the FHA or federal housing administration, or the RHS – otherwise known as the rural housing services. Conventional loans can sometimes be conforming, which basically means that they follow the guidelines that have been set forth for certain types of loans.

Which Loans Should you Avoid?

Though only you can decide what kind of loan you need for your specific goals or ambitions, there are certain types of loan that should generally be avoided at all costs because they can sometimes take advantage of customers and leave you in a very difficult financial position. For instance, short-term loans that allow you to access a significant amount of money before payday can sometimes be dangerous because they come with high annual percentage rates that are extremely difficult to pay off.

If you are in a very difficult financial position, you should always consider the different options that are available to you in full before you take out a payday loan. It’s also important to double check any loan offers that seem too good to be true or may be with lenders that you aren’t familiar with. Sometimes financial options can be given that look similar to loans but are actually extremely dangerous cons.