Find The Perfect Loan For You
Personal loans are regularly used to fund those little extras such as a holiday abroad
, a new car and increasingly as a means of debt consolidation. Most people know or have had a loan as shown by the fact that in the last 12 monthsWhat is a Personal Loan?
There are two main types of personal loans - secured and unsecured. Secured loans are usually secured on your home - which means if you default, you may be forced to sell your home to repay the loan.
Unsecured loans are not tied into anything, but if you don't make the repayments, the bank will blacklist you and you may find it difficult to take out other financial products, such as credit cards or a mortgage. A Secured Personal Loan is usually secured on a borrower's property and is therefore not available for people living in rented accommodation.
Taking out a personal loan is a way of borrowing money from a bank, building society or other financial service provider. The amount you can borrow depends on your credit status.
Generally speaking, the more you borrow, the lower the interest, but at the time of writing, rates vary from around 8% to 20%, so you'll need to shop around. This is made more difficult by the fact that it is not easy to compare personal loan rates because different lenders calculate the total cost of the loan (known as the APR or annual percentage rate) in different ways.
Most loans are re-paid by monthly installments and the repayment period will be agreed before you get the money. This is usually a fixed period and you will have to pay a redemption penalty - an example being two months interest - if you want to pay it off sooner.
The longer the repayment period, the more interest you will be paying, so go for the shortest one you can manage. Flexible loans, which let you borrow and pay back at will, are becoming more common, but the interest rate charged is often significantly higher.
Look for these things when seeking out a loan:
Affordability
Make sure you have the ability to make your payments in full and on time. If you don't your credit could be damaged making it impossible to get funds or you have to pay very high interest rates to borrow.
Terms and Rates
Shop around for the most advantageous rates and terms. The internet is a vast source of information and offers and in the current climate, the lenders are competing with each other to gain customers.
So if you are a good risk, you could bag yourself a great deal. Read all paperwork.
Make sure you know exactly what you're signing up for and what financial commitment it means for you.
When you take out a personal loan, you're free to use the money for any purpose. It all depends on your personal situation.
You could use your personal loan to:
Fix up or add an addition to your home.
Pay off higher interest debt from credit cards or other loans.
Pay unexpected bills for car and home repairs.
Clear up medical or dental bills.
Purchase new furniture or appliances for your home.
Help your children pay for college or pay for classes for yourself.
Buy a new or used car.
Cover the cost of relocating.
Arrange a very special vacation.
You need to make sure that if you are taking a loan out for just a few hundred dollars that you pay it back quite quickly. You will need to check on the interest rate and fees that are being applied to the loan before you decide how much you need and for how long you need it.
For instance, payday loans are meant to just have a term of a couple of weeks until your next paycheck. If you took a lot longer than that to pay it back, you will be paying more for your interest than the original loan you took.
That is why it is important to research exactly what loan serves your immediate needs. Payday loans are not recommended for things such as vacationing, unless you know for sure you can pay it back by your next payday.
by: Terry Daniels