subject: All You Need To Know About Loans [print this page] All You Need To Know About Loans All You Need To Know About Loans
A loan is an agreement between a borrower and a lender, whereby the borrower borrows some money. The lender charges interest on the amount borrowed and expects the borrower to repay the money usually in equal monthly installments.What Types of Loan Are Available in Todays' Economic Climate?Even though the credit crunch has caused most lenders to tighten their criteria when assessing a loan application, and the number of conventional lenders has decreased quite considerably. It has opened the door to some new types of lending that seem to be thriving because of the massive gap that has appeared in the market. I have detailed below most of the different loan types that people have access to, with the "normal" loan types mentioned first and more untraditional towards the bottom.Secured Loans.Secured loans are loans that are secured on some collateral usually a residential property. They can be taken out for any amount from 5,000 to 100,000 for terms of up to 25 years, and because the loan is secured against property the lenders are still happy to lend this type of loan. There are also still one or two lenders that are happy to lend money to people with bad credit, although they will need to see more equity in the property if they are to lend to people with adverse credit. There are however significantly less lenders that still offer secured loans and they will lend a smaller percentage of the value of the property now than they would before the credit crunch took hold of the economy. Even though the interest rates have been increased compared to what could be acheived 2 or 3 years ago, it is still probably the least expensive way to borrow large amounts of money.Unsecured Loans.Sometimes known as personal loans, this type of loan is still available. Unfortunately the lenders do not have the same appetite for lending, and are now likely to reject an application from anybody who does not have a good credit record. The amounts that are available have also been squeezed and in general will only lend up to 15,000 although in some cases where the applicant has a really good credit record some lenders will lend up to 25,000. Loans of this type are also only available for shorter terms of up to 5 years in most cases but again will sometimes stretch to 10 years for the larger loans. The interest rates charged for this type of loan will probably be lower than any other type of low value loan.Payday Loans.A payday loan is a short term loan of up to 850 in most cases, but some lenders will lend as much as 1,000. The loan has to be repaid in full on your next payday. Over the last 4 years or so as a result of the credit crunch and the effect it has had on the UK finance industry, this type of loan has seen a huge increase in popularity with just over 4 million payday loans taken out this year (2010). The loans are available to anybody over the age of 18 in full time employment that has their salary paid into a bank account with a debit card. The lenders usually charge a flat fee of between 20 and 25 for every 100 borrowed, which when translated into APR looks excessively high, however when compared to an unauthorised overdraft can be considerably cheaper.Guarantor LoansA guarantor loan is a relatively new product to the UK finance industry that has come about as a result of unsecured personal loans becoming less available. They are available to people who may not have the best credit record without having to have a credit check, so long as they can arrange for a suitable guarantor to co-sign or endorse the loan. They are available for amounts of up to 5,000 for up to 60 months, this type of loan also attracts a higher rate than what you would expect with secured or unsecured personal loans.Logbook Loans.A logbook loan is a type of secured loan only this time the loan is secured on a car logbook. They are available for loans of any amount up to 50,000 without a credit check. The car will need to be free or nearly free from finance, and the applicant will need to be the registered owner. This type of loan is still available to people who have a bad credit history, however the rate that is charged will again be quite high compared to that of a conventional secured or personal loan.Summary.There are still loans available in the current economic climate, with a wide variety of rates charged. As such it is important that before taking out a loan of any kind you should make sure that you are taking the best option with the lowest interest rate.
