Mortgages

Loans - Unsecured and Secured Personal Loans

Loans come in all shapes and sizes to suit the needs of the borrower. They can be divided generally into secured and unsecured loans.

Today you can take a loan out for all sorts of reasons, perhaps to consolidate existing loans or credit card balances, to buy a new car, extend or make improvements to your house or you are embarking on your university path and need a student loan.

Secured Loans

Secured loans are sums of money borrowed against property, such as a house. Because the borrow puts up an asset—i.e. the title to his house—the lender is at less of a risk for the borrower to default repayment. Reflecting this, lenders tend to charge lower interest on secured loans.

The typical interest rate on a secured loan of £10,000 is around 11%— but rates can go lower and much higher than this average. Secured loans can be used in many ways—home improvement, holidays and big-ticket purchases of white goods are commonly funded through secured loans. A secured loan can be attractive to those who would otherwise have trouble borrowing based solely on their credit history. Caution must be taken with any secured loan, failure to pay back the debt can result in the repossession of your property.

Unsecured Loans

Unsecured loans are granted based on credit history. When considering a loan application, a bank or other lender will conduct an extensive credit check. Those with a clean credit history should easily be able to get a loan with favourable interest rates. People with past credit troubles are not wholly disallowed from obtaining a loan. Those with a less than rosy credit history should seek out specialised lenders. While the rates will be higher on a bad credit loan, applying at random is inadvisable.

Not only existing debts but applications will also show on your credit history. These “footprints” are viewed negatively if they show up often or in clustered time periods. Take care when applying for a loan since they do reflect on your credit score and also be realistic when you target a loan.

The current industry average interest rate for an unsecured loan of £5,000 is about 6%. Of course, rates vary widely depending on the amount being loaned and the credit score of the borrower.

Tenant Loans

Tenant loans are a form of unsecured loan for borrowers with no property of their own to secure a debt against. Proof of salary earnings and a bank account are the minimum requirements for such an unsecured loan.

Payday Loans

Payday advance loans are quick, high interest loans usually taken out in emergencies requiring fast cash. They can be arranged remotely by faxing the lender your bank account information, with them depositing the loaned sum in your account the next day.

Student Loans

Student loans are government financed and linked to the price of inflation rather than variable interest rates. Issued to economically needy students, they are paid back after graduation.

Personal Loans

Personal loans can be used for many things, and are becoming a popular tool for debt management. By consolidating various debts from credit cards, mortgages and other previous loans into one loan, borrowers can potentially save on interest payments as well as simply their finances.

 

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