Loans

Personal Loans

You can take out a personal loan for all sorts of reasons, the most popular are to pay for home improvements or for a one off commitment such as a wedding or round the world trip. You can apply for a secured personal loan in which case the lender is entitled to posses your home if you default on the repayments.

It is possible to borrow an amount and then an additional amount during the life time of the loan. You may also be able topay the loan back early as long as there are no early payment redemption penalties in the agreement. The payments can be spread over anything from 12 to 60 months with some providers. Many providers will encourage you to take out a loan protection policy at the point of agreeing the loan and this can add a great deal to the overall cost of the loan as interest may also be charged on the protection part of the loan and be spread across the entire lifetime of the loan.

Secured Loans

A secured loan requires the borrower to put up their property as their main asset. If you are unable to pay off the loan you have agreed to sign over the deeds to your home to the lender. Interest rates are usually the main consideration and it is worth doing some homework before signing on the dotted line. A fixed interest rate means that it will be fixed at a rate agreed at the start of the loan regardless of any rises to the banks base rate. This is popular with lenders who prefer to pay one set amount that does not change. A variable rate can rise or fall in line with any rate changes during the life time of the loan. A ‘typical interest rate' is the rate of interest that you may be offered depending on your own personal circumstances. A ‘set interest rate' is one that is offered to successful applicants regardless of any risk they present.

When applying for a loan it is essential that you read all the small print as there may be conditions attached that could affect the way you repay the loan. Such as redemption penalties if you decide to pay the loan off early. This could be an additional sum that equals as much as two month's interest.

Unsecured Loans

The difference between an unsecured and a secured loan is that the borrower does not have a property to secure a loan against. Many lenders will lend a fairly substantial amount of capital, often up to £25,000, to people who are tenants and do not own a property of their own. You are not going to be offered the most competitive rate of interest so it is worth shopping around. The lender will approach credit reference agencies to access the risk. The lender will require certain information from the borrower such as proof of income and references, these loans are not usually available for speculative purposes or for buying property abroad. You may find that applying for an unsecured loan is a speedy process as a valuation of your home does not need to be arranged.