Committing to the wrong type of loan could cost you unnecessary interest charges and high repayment amounts.
Once you have committed to to the terms of the loan there is no going back & you will be bound to the terms & conditions of the contract.
This is why it is important to compare the loan options available to you to avoid locking yourself into a contract that could put further financial pressure on your debt situation.
So whilst there are various types of loans & options available for getting credit of the most popular source of credit is to apply for a personal loan which is generally easily secured depending on your own personal circumstances.
Types of Loans
The following links will provide more information on the various types of loans available as well as how to apply for a particular loan;
- Personal Loans
- Unsecured Loans
- Pre Qualified Loans
- PayDay Loans
- Blacklisted Vehicle Finance
- Loans For Foreigners
- Micro Loans
- Bad Credit Loans
- Debt Review Loans
- Loans For People Under Administration
- Motor Vehicle Finance
- Student Loans
- University Bursaries
Secured vs Unsecured Loans
Basically a secured loan is one that will only be granted if you put up collateral in the form of property or something of value.
The lender will be able to recoup the amount of the loan, including interest & costs, from the collateral should you default on the loan repayments.
Interest rates are usually lower for secured loans.
Examples of Secured Loans
- Vehicle Finance
- Home Loans
- Loans For Large Purchases Such As Boats, Caravans, etc.
With an unsecured loan you won’t have to put up collateral, however defaulters are dealt with differently & sometimes very roughly, depending on what sort of lender you used.
If the bank has granted you an unsecured loan it will usually be based on your credit history & if you default they could send debt collectors around to recover their funds or freeze your accounts.
Examples of Unsecured Loans
- Personal Loans
- Student Loans
- Credit Cards
Debt Consolidation Loans
These types of loans are used to consolidate all of your debts into one.
The benefit of doing this is that by consolidating your debt you can reduce your monthly debt repayments by getting a lower interest rate for the new loan as opposed to the higher interest rates of the individual debt amounts.
Another benefit is that with the lower interest rate you can get rid of your outstanding debt quicker.
Home loans are specifically secured for the purchase of new & used properties and usually require a deposit of around 10% of the selling price.
The home loan interest rate can often be negotiated between a few percentage points above or below the prime rate.
The Easiest & Cheapest Way To Borrow Money
If you have a home loan, mortgage or bond with a bit of equity in it, ie you have paid more than the minimum required amount over time, you will usually be able to access funds from this equity.
This will allow you to borrow money without hassle & at the best interest rate – tax free.
3 Important Factors To Consider When Signing Up For a Personal Loan
- Interest Rates – Some lending institutions may offer personal loans at higher interest rates than others so you need to compare your credit options to ensure you are getting your funding at the lowest possible interest rate.
- Repayment Terms – The terms & conditions of getting your loan may also vary between the banks & lending institutions so you need to ensure that you do not commit to unrealistic repayment terms & periods that will increase your financial pressure.
- Affordability – This may seem to be an obvious one but you would be surprised as to how many people are willing to sink themselves into a terrible downward spiral of debt with no chance of getting out of it just for some short term relief. So before committing to more debt just be honest with yourself & consider your long term financial situation & do not take on more debt if it is not affordable.
Generally speaking the main stream banks & lenders should be your first port of call as their interest rates & finance costs will be lower than smaller finance houses.
However the smaller micro lenders often charge higher interest rates, often exorbitantly high, but are more willing to provide credit to applicants who are blacklisted or to those who have poor credit records.
So for some people their choices are limited as their credit record may by poor in which case the mainstream banks probably will not grant them credit.
Finally, Remember This Before Signing Your Loan Application
In conclusion you need to do a fair assessment of your financial needs & the how the amount of the new loan will impact on your overall debt & ability to repay it.
Therefore it is extremely important to choose the right type of loan & one that is appropriate for your circumstances, as the wrong choice could end up costing you more in unnecessary finance fees, interest as well as putting you under extreme pressure when it comes to meeting your monthly repayments.
If you are still unsure of making the correct choice for your credit needs you would be well advised to seek advice from a professional.
One Last Tip
When it comes to repaying all types of loans, whether it is a personal loan, a study loan or your mortgage, you could be saving hundreds if not thousands by paying a little extra each month (assuming there are no penalty costs for not paying the exact amount due – just confirm this with the finance house).
By doing this you will not only save a lot in interest & finance costs, but you will also pay it off sooner & be debt free long before you expected.