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Personal loans: choosing the one that’s right for you
Whether you are considering a dream Disney World holiday in Florida, a wonderland wedding or you simply want to consolidate your existing debts, personal loans can be a low-interest option to make it happen.
There is a myriad of personal loans on the market, all of which are tailored towards groups of customers and specific target markets. Knowing your credit rating and how you fair up can give you a reliable insight to what type of loan you should be applying for.
In the past secured personal loans were seen as a negative form of credit for those in need of finance, who were unable to get personal loans with asset protection. Due to the decrease in the number of loans available, however, secured personal loans now often offer the best deals and the most comfortable payment terms.
Ideally, secured personal loans are the best option if you are looking for the lowest interest rates. Unfortunately this type of loan is available only to homeowners or those with property, as your borrowed amount will be secured against your assets.
Secured personal loans are far more likely to be approved upon application, as the risk to the provider is less than other lending options. They are also most suitable for long-term, large lending plans. The additional security on the borrowings means that lenders will consider accepting an application for a secured loan even if you have had various jobs and incomes in the past few years.
As these types of personal loans are secured against your home, lenders are slightly more lenient should you default on your payments. Lenders know that your assets are important to you and are more likely to be prepared to agree upon alternative repayments options.
It is worth remembering that despite this, if you do fail to keep up your repayments and do not speak to your lender, your assets can be repossessed.
The consequences of not keeping to this kind of credit agreement are clear and secured personal loans should only be taken out if you are in need of some additional finance and do have the means to pay back both your mortgage and your new borrowings consistently.
Unsecured personal loans are an alternative for those who rent or who don’t own their own property.
Lending amounts are usually lower on unsecured loans than other personal loans. The risk to lenders is higher, because there is no asset to secure your borrowing against.
Unsecured personal loans are suited to those who want to borrow less for shorter periods. Interest rates may be slighter higher in some circumstances; however, this may be relative to the payment time on your loan.
Secured personal loans are massive commitments and if you are looking to consolidate a few store cards or are considering lending to help fund your weddings, unsecured personal loans are usually substantial and more suiting to the situation.
Are personal loans really the right product for you? Remember that personal loans usually mean that you are signing up to a long-term credit agreement for a large sum of money.
Many credit card companies now offer low interest or zero per cent interest for a period of time. If you are looking to use a small amount of money and pay it off quickly in scattered payments then a credit card might be a more suitable option.
Speak to a financial advisor, someone independent to your usual banking sales team, who can offer you neutral advice on which product best suits your needs. Following this, online comparison sites can help ensure you get the best deal.
Remember, whichever product you choose to apply for, all lenders have different scoring systems that are used in conjunction with various credit agency reports. Your situation is never completely predictable, which is why it is important to seek advice and compare options so the chances of your application being declined are reduced.