At some time in your life, you will most likely have to borrow money. This is part of today’s society where people prefer to buy goods and services on credit rather than saving up and paying cash. The positive side of having to borrow money is you build a credit history which is important for major purchases such as buying a house. If you don’t have any credit history you may find it difficult to borrow money from a good number of lenders.

Which loan is best for me

There are two main types of loan available on the market. Unsecured and secured. These are explained in more detail below. Before choosing the type of loan you need, consider the following points.
1. How much money do I need to borrow.
2. Over what length of time do I need to borrow the money.
3. How much can I manage to pay off each month (or payment cycle).
Answering these questions will help you to come to a decision on whether you should have a secured or unsecured loan.

Secured Loans

Secured loans (or homeowner) loans are secured against some form of collateral. These loans are more often than not secured against your car or house as they are generally a person’s biggest asset. By securing your loan against an item, it allows the loan provider to sell your car or house if you fail to make your loan repayments. By having the loan secured the loan provider is assuming a smaller risk in lending you money as there is a good chance of them getting their money back. This will result in a reduced interest rate been charged on the loan. Secured loans are more often than not taken over a long period of time and for a sizeable amount. A good example of a secured loan is a house mortgage.

Unsecured Loans

Unsecured (or personal) loans are not secured against any assets. The loan providers make their decision on whether or not to lend you any money on the basis of your credit history. By examining your credit history helps the unsecured lender to determine the likelihood of you repaying the money they have lent you. If you have county court judgements (ccj’s) against you name or a poor credit rating, it may still be possible to obtain an unsecured loan, however the interest rate you will be charged will be greatly increased. This is due to the increased perceived risk for the unsecured lender.

Borrowing money can be stressful and is a major decision in your life. Always ensure you seek sound professional advice prior to borrowing any money and prior to signing any papers. Many lenders work as independent agents on behalf of the banks and major money lenders. They can supply you with free advice in the hope that you may borrow through them. Ensure that any information you are given has no strings attached and ask if there are any upfront fees for the advice. Use the internet to compare rates of interest and terms and conditions so you know you are getting the best possible deal available prior to making the final decision on which loan provider you will borrow from.