Which Loan Part 1
So times are getting hard and you're going to need to take out a loan but how will you know which type of loan to take out? You will find the answer to this question using your personal situations such as how much money you earn, have you got collateral, how much you want to borrow and how long you want to take to pay it back.
There are usually two types of loans which are most commonly used; the secured loan and the unsecured loan, also known as a personal loan. These loans suit different people in different situations and are very dissimilar to each other. Your choice will depend on your situation.
A secured loan lets you borrow a high amount of money from a lender, normally over £25,000. The lender will need to have security (collateral) against the loan due to its high amount as if you fail to make the repayments for some reason then they can use this collateral to obtain their money. Collateral is something of high value which you own that is used as a deposit against the loan; this is normally a house, a car or something else of high value.
Interest rates for a secured loan are low and fixed; this is due to its security as the lender has collateral if you fail to make the payments so they will offer low rates which will not fluctuate through out the repayment period.
The other benefit with the fixed rate is as you know it will not change throughout the entire repayment period, it makes budgeting a lot easier.
By: Barry Loughran
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