18 Feb 2008 03:52:01 | Rachel Lane
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 usually involves:
* Requesting a typical amount for the loan * Discussion of
interest rate (APR) and possible loan payment protection
insurance * 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 penalty.
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