Lions and loans: why finance should always be personal
Different types of loans are available for almost every aspect of your
life: personal loans, car loans, secured and unsecured loans, home loans,
homeowner loans, student loans, graduate loans and career development
loans (CDL). If you’ve suffered from credit problems in the past and now
hold sub-prime characteristics, then you will be eligible for adverse
credit and adverse loans.
You can always borrow money these days, but it is crucial to read the
small print as the difference between interest rates is enormous and
stories of people forced to pay off amounts which are five times the
amount of their original loan are not uncommon.
There are also numerous stories on unemployed couples being sold loans,
such as the case of Julie and Kevin Davies, reported by the BBC. The
couple were already experiencing difficulty in paying off their existing
debts of £4,000, when they were sold another £20,000 loan by Lloyds TSB.
Loans of £1,000 to £25,000 can be taken out and repaid over a period
typically varying between six months and 10 years depending on your
credit history and available finances. Loans are usually secured or
unsecured. Secured loans are tied to your house, so you can be forced to
sell the house if you are unable to make the repayments. Unsecured loans
do not impose the same restriction, though a default on repayments may
result in being “credit blacklisted”. Once blacklisted, you may get
future credit card, mortgages and hire purchase applications rejected, as
well as face a potential higher rate of interest for all existing debts.
It is absolutely crucial that you shop around for a loan and not just
through the high-street banks. The internet offers a wealth of
information available and there are many sites which compare the prices
of products, and to really ensure you get a good deal – compare the
different comparison sites. In the UK moneyfacts, moneyextra and (
moneynet ) offer price comparison services for a wide range of loans,
amongst other financial products. These sites also offer consumer
information guides, which you can either print directly off the website
or download on to your computer.
Do read all the terms and conditions carefully and ask friends, family
and your financial adviser / bank adviser if you don’t understand a
particular statement. The annual percentage rate (APR) is particularly
important and can make a difference of thousands of pounds over the term
of the loan.
Unsecured loans can be purchased from building societies and banks, as
well as certain high street shops. Unsecured loans may be taken out for
something specific or simply to make life more ‘comfortable’. The process
* Requesting a typical amount for the loan
* Discussion of interest rate (APR) and possible loan payment protection
* A credit check, you may wish to get one of these first, so you know
what to expect
* Reading the terms and conditions and then signing the agreement
* Money can then be transferred into your account
In the discussion of secured versus unsecured loans, moneynet explains
that although secured loans can offer lower interest rates and
repayments, many people do not wish to jeopardise the potential loss of
their home in the default of a repayment of a secured loan. In unsecured
loans, pay attention to the difference in APR, term of the loan and any
additional charges such as an early settlement charge or redemption
About the Author
Rachel writes for the personal finance blog Cashzilla:
Rachel is a disillusioned, disaffected and broke graduate, exploiting new
media for financial therapy.