Loans - what you need to know
Looking for a loan?
Whether you are looking to consolidate your debts, buy a new car, start some home improvements or have something else in mind for some extra cash there are many different loan options available at the moment so why not shop around to make sure you get the best deal. Confused.com has a range of loans available but which is the right one for you? Here is a quick rundown to help you decide.
Unsecured Personal Loans
With an unsecured loan you do not have to put up any collateral in order to take one out i.e. the lender doesn't need any type of guarantee that if you don't repay the loan as you promised they will be able to take something of equivalent value to cover any outstanding repayments.
Unsecured loans typically offer amounts ranging up to £25,000 with the flexibility to payback the loan over a number of years if you so wish. With most unsecured loans the interest rate is fixed which means the rate will not suddenly jump halfway through a term, and as such you will be able to budget for your repayment amount as that will remain the same.
To get an unsecured loan you have to complete an application that will check your credit file. The strength of your credit profile will impact not only whether you are accepted for the loan or not but also how much you can borrow and what your Representative APR will be.
A secured loan is where you take out a loan with your property as the collateral. So if you fail to make the repayments the lender has the right to take what they are owed from the value of your property and sometimes this can only be done through the sale of your home. So the lender is secure in the knowledge that if you cannot repay the loan they have your property to get the funds back from.
A secured loan can offer a larger loan amount up to £100,000 in some cases and also the period of repayment can be extended further than most unsecured loans. So it all depends on how much you are looking to borrow and also if you are a home owner. Secured loans are only available to those who own a property outright or have a mortgage.
Also, unlike unsecured loans, the interest rates on secured loans are often variable meaning that the rate you pay back can be increased as well as decreased.
What to consider before applying for a loan
It is important to do your homework before applying for a loan.
Consider how much you want to borrow and what monthly repayment you can afford. It may help to go through all of your incomings and outgoings to determine what sort of repayment suits you. You can reduce your monthly repayment by taking the loan over a longer period, but the trade of for this is the longer the loan is outstanding the more you will have to pay back in the long run.
Shop around to find the right loan that suits your needs, some deals may only be available online or exclusively for existing customers so check the terms before you apply. Also consider if there are any additional features that you would find useful like payment holidays or no early redemption charges. Lastly check how you can manage your loan, and if you are accepted ensure the date any repayment is taken fits your schedule i.e. it is taken after you have been paid each month.
With unsecured loans the lender may ask you to provide proof of earnings or proof of address as part of your application. A secured loan will possibly require you to get your property valued and provide details of any existing secured loans and/or mortgage balance as well as proof of address and earnings.