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What is the Right Type of Loan For You?


There are some important issues to consider when looking into a loan. Chief amongst these issues is whether or not a secured or unsecured loan is best for the kind of borrowing that you want to make, as well as whether you are eligible for either.

Other issues include whether or not it is worth taking on debt consolidation loans, and whether there is too much risk attached to payday loans. At the same time, it is worth considering the benefits of guarantor loans, and how they can act as an important alternative to other types of secured loans. A comparison of these different types of loan can be found below:

secured loan vs unsecured loan
secured loan vs unsecured loan

Secured vs Unsecured Loans

A secured loan is effectively one where the value of the loan is offset by some form of collateral, which acts as the security. In most cases, this can be a high-value asset like a house and is often used as part of a mortgage loan.

Secured loans have the advantage of a lower interest rate, which can allow for reduced annual payments. A secured loan can also open up the potential to take on more loans by using the property as collateral.

However, a secured loan does contain the risk of having your property repossessed if you cannot make your payments.

By contrast, an unsecured loan is one that is taken without security. As a result, interest rates are higher, and there may be a longer-term payment plan. Whether or not you can take out an unsecured loan will depend, in part, on your credit history and record of paying back previous loans.

Debt collectors will typically be called in if you default on a loan, and can lead to criminal prosecution. Most personal loans issued by a bank are unsecured and are ideal if you have a fixed amount of money and a purpose for borrowing it, as well as the clear knowledge that you can repay the principal and the interest on the initial loan.

More Differences Between Secured and Un-Secured Loans

When you are planning to take a loan the first thing that should be done is to know the need for the loan. The amount, the repayment mode, interval, and obligations should also be known. These will help in guiding what type of loan you should choose.

Secured bank loans: A secured bank loan is usually a larger amount generally used for making larger purchases, such as a car or a home, etc. This form of loan requires collateral from the borrower, usually against property or other high-value belongings.

Unsecured bank loans: An unsecured bank loan is a loan that doesn’t need any collateral but the signature of the borrower is sufficient. They are also known as signature loans. An example of an unsecured bank loan is a payday loans.

In these kinds of loans if the borrower gets into some trouble in repaying the amount that is borrowed, then the PPI policy can be utilised. This is useful when you struggle to meet payments due to an illness, injury or job loss. Under these circumstances, a PPI policy will cover your loan repayments for a period of time till you can manage the payments yourself.

The ways in which Secured bank loans differ from unsecured bank loans are:

  • One: Secured bank loans provide a higher amount for borrowers. They also need complete information regarding the assets that the loan will be secured against. Whereas unsecured bank loans provide a lower amount for borrowing and don’t require as much information.
  • Two: Secured bank loans offer lower rates with high borrowing amount with a longer repayment period. Whereas unsecured bank loans offer higher rates with low borrowing amount with a short repayment period.
  • Three: Some of the secured bank loans are home equity loans, car loans, boat loans, etc., which are required by most people, whereas unsecured bank loans are personal loans, education loans, etc. which are sometimes necessary but not highly desirable.
  • Four: In Secured bank loans the asset is secured. Whereas in the unsecured bank loans the asset is not secured which results in risk for the lender. The repayment period is relatively long when compared with unsecured bank loans.
  • Way five: The secured bank loans are approved faster when compared to unsecured bank loans. The flexibility is also better in secured bank loans when compared with unsecured bank loans.

Use these tips to have a clearer view of your borrowing needs and choose the right type of loan for you.

Alternative Options

People with a poor credit history can attempt to boost their ability to take on better loans – low interest and higher amounts – by consolidating their initial debt into a single loan, which is spread over a long period of time.

This option can be preferable to those that cannot make their regular payments on credit cards and existing loans. However, caution should be exercised in terms of potential debt consolidation scams.

Another option is a payday loan, which represents a short term cash advance that is repaid within a month to a few months. While intended to cover shortfalls before payday, and issued with less strict conditions than other loans, payday loans represent a significant risk.

APR can be up to 4000, meaning that a defaulted repayment will result in a much larger level of interest debt than comparable loans.

Guarantor Loans

Potential borrowers that don’t want to take on the risk of a payday loan, or struggle to receive a favorable unsecured loan due to their poor credit history, should consider a guarantor loan. A guarantor loan involves a third party – typically a property owner with good credit history – agreeing to cover repayments if the borrower defaults.

A guarantor tends to be a family member or friend. The borrower is able to rebuild their credit history by paying off a secured loan and can go on to take on additional loans once this has been achieved.

Comparing Guarantor Loans – What to Look out for?

Unfortunately, common sense can often disappear when it comes to looking for a loan. Whilst people are quite happy to shop around to find the best deal when they are looking for a new TV or a new sofa, very few people seem too few trying to get a loan in the same light.

When you think about it though, why should you pay more for something when a cheaper option may be available to you? Why should you sign up with a provider who may have a bad record for customer service? Loans are no different than anything else and taking some time to find the right option for you is 100% the right thing to do.

The Times are Changing

It wouldn’t have been too long ago that your options were limited when looking for a guarantor loan. With few lenders stepping up to the plate and offering this specialist bad credit loan, what you see was very much what you got in the guarantor loan market and all the hunting in the world would not identify any other lenders.

However, this is certainly not the case anymore as there are a number of lenders out there fighting for your signature on their loan application.

First Things First

Whilst the level of APR for guarantor loans does not vary as greatly as with other bad credit loans, there is still a reasonable amount of variety available.

Unless you are a fan of wasting money, no-one should have to pay more than they have to for anything and by shopping around there is every chance that you will be able to find a loan which can offer substantial savings when compared to some of their counterparts.

Finding the cheapest current loan could not be easier than it is right now. With so many comparison websites out there, all of the leg work is done for you. Just type in the required information and let the answers come to you!!

Find Out All The Information

Checking out the APR of the loans is just part of the information that you need to make a fully informed decision though.

Whilst this will help to accurately identify how much the monthly repayments will be, once you have decided on the amount of the loan and the repayment duration, there are still other things that you need to factor in.

Is the APR fixed or variable? Fixed will allow you to budget accurately because the repayments will stay the same whereas variable will dangle the carrot of the loan becoming cheaper, although it could obviously go the other way.

Other things to factor in include any additional payments which may be incurred. Will you be charged if you fall behind with your payments? Are there any fees for setting up the loan? Will you be charged if you wish to repay the loan early?

These are all things which must be factored into your decision-making process.

Customer Service

We have all heard the horror stories associated with payday loans and how some of the lenders do not treat their customers well at all.

Fortunately, the general overall feeling towards guarantor loan lenders is far better. Checking out the lender’s website will provide some limited information. Whilst there will be testimonials available, it is fair to say that you probably won’t find too many bad ones on the lender’s own website! It is always good therefore to find somewhere with a little more impartiality.

There are a number of independent websites available which allow customers to provide honest and accurate feedback regarding the level of service and their experiences. These are always well worth paying a visit to before signing on the dotted line.

By doing a bit of digging, it will quickly become apparent which are the better options.

Convenient Logbook Loans Online

In the past logbook loans have been looked on with some distaste. A stigma has been attached to all kinds of short term lending as a result of shady local businesses and a small but loud group of irresponsible consumers. More recently, however, a new trend has emerged that adds some promise to the logbook loan industry.

A car is a relatively large item to lay on the line for short term credit. You may depend on your car to be your transportation to work or school, or as a way to get your kids to their school or football practice.

When you are in a situation that requires that you take a loan out secured against your vehicle you find yourself in a very vulnerable financial situation.

While there are certainly advantages to using a car as collateral against whatever amount you need to borrow, there is also the risk that there will be further unforeseen circumstances.

Furthermore, the industry has typically been run by local loan sharks who would just as quickly break your legs for not paying than they would inform a national credit bureau. This fact has added significantly to the stigma that surrounds logbook loans and short term credit in general.

Now there is a better solution. There are websites that are being developed that let consumers of short term credit compare different lenders. These sites list the terms of the loan, the loan company, and all the requirements necessary to secure the loan.

They also link directly to the loan providers’ websites so you can see the current terms for yourself. This means that when applying for a logbook loan, a car owner may have a far greater understanding of what they are getting into before finding themselves signing their vehicle away at some local no-name shop just because they are in a desperate situation.

The fact that the loans are available online provides additional levels of convenience. You can navigate through the whole process on your own from your home, a coffee shop, school, work, or wherever you are able to get online.

You can easily look through the various websites of loan providers and decide for yourself exactly which one you think will provide the best service. Also, you can submit your application and receive notice of approval within minutes.

This is especially important when you are dealing with an emergency situation that does not afford you very much time to call around to different local loan shops, comparing rates, while also taking the time to get transport to these businesses, fill out applications, and wait however long to find out whether or not you will actually be approved for the loans that you are applying for.

All in all the market for logbook loans is made much more efficient by the creation of an online marketplace for short term credit. In not too long, any stigma attached to this form of borrowing will be forgotten, and many more people will use it as a convenient measure to be taken during a financial emergency.

Can Logbook Loans Improve Bad Credit?

For many people, the recent economic downturn has hit them hard where it matters most, in their pockets. There are more and more people are having trouble paying for their food, utility bills, and credit card payments.

For those people who have an excellent credit rating, then all they need to do is to ask their bank for a loan or an overdraft extension.

However, for those people whose credit history is less than sparkling, then securing a loan or overdraft increase can be difficult. That is why more people than ever before are turning to logbook loans to help them out of their tough financial situation.

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In recent years payday loans have become more and more popular, however, due to the recent bad press regarding their high interest rates and unscrupulous lending practices, more people are now looking at alternative ways to obtain the credit they so desperately need.

Credit Options For Car Owners

Car owners do not always realize that they have an asset that they can make use of in order to obtain hassle free credit, and once more they are a good way to boost a low credit score.

Logbook loans are similar to payday loans in that they do not typically require a credit check; however, instead of being based on your income, they are secured against your vehicle.

A car logbook is a document that holds the details of the cars important information, such as the vehicle registration and VIN numbers, they also have up-to-date information on the owner, their name and address, etc, and this means that they are an up-to-date record.

The amount of the loan that can be secured against a car logbook is dependent on the age and condition of the vehicle and payments typically range from the hundreds to the thousands.

Who Can Get A Logbook Loan?

Similar to payday loans, a logbook loan can be very quick to acquire and can even be done over the internet. There are going to be a few criteria that need to be fulfilled before the logbook loan application can be completed and processed.

Firstly, there should be no outstanding finance on the vehicle, so it needs to be owned outright by the person who is asking for the logbook loan. Also, the tax and insurance on the vehicle need to be paid up with no outstanding money owning.

One of the best things about a logbook loan is that, even though you are using your car as collateral, you still get to keep it and drive it around. All the company providing the logbook needs is the actual logbook itself, not the car.

Repayments are worked out depending on your financial situation and how much you have borrowed, so the longer you take to repay the loan the smaller your monthly payments will be. Perversely if you opt for a shorter period of time to repay the loan, your monthly payments will be a lot higher but you will pay it off sooner.

Improving Your Credit Score

If you are one of the many people who have a credit score that is on the low side, and you wish to improve your credit score, then logbook loans can actually help you to improve your credit rating.

Even though like payday loans, logbook loans do not require you to have a squeaky clean credit report, they can report your good repayment history on a logbook loan to credit reference agencies.

This will help to raise your credit score, plus, if you did default on a logbook loan this will not be reported to credit reference agencies either.

However, be warned, not paying your logbook loan will result in you having your car repossessed and you could still end up with solicitor and court fees for any outstanding money owed.

A bad credit score need not exclude you from borrowing the money you need to make ends meet in a difficult financial time. In fact, when used responsibly, short term loans like logbook loans can actually be used to improve your credit score although this is a long process rather than a quick fix.

Small Loans Explained

Taking out a loan isn’t always for the big things. It’s often just to manage when there is an unexpected expense or emergency. If you have no savings to draw on, then at times it’s the only way of covering a cost.

loans

Unfortunately, however, finding the right loan isn’t always an easy process. This is especially true if you have bad credit. So here’s a quick guide to what you need to know if you are looking for a small loan.

Short Term Loans

If you’re looking for for a quick fix to an unexpected expense or shortage, and you can’t persuade a friend or family member to lend you the cash, then a short term loan can solve the problem. A small loan is generally regarded as a loan for an amount beneath £1000. Short term loans are normally small loans, repayable over a short amount of time. Short term loans are unsecured, which means that they are not secured against any large asset you might own. This makes them more expensive than secured loans, so comparing the costs is important.

Understanding Interest Charges and APR

The cost of borrowing can be confusing to a lot of people. Basically, the cost of debt is a combination of the interest rate, and how long the money is borrowed for. The interest rate is a percentage of the loan amount charged, while the APR includes the interest rate and fees. APR spreads the rate of these fees over a year and then come up with a different rate based on the inclusion of the fees.

APR is a useful guide to the cost of a loan over one year, but this can make the cost of a short term loan seem high.  If for example, you borrowed £100 for one month, at an APR of 1,200%, you would pay back only £125 at the end of the month. Over a year, however, this would cost much more, because you are not only being charged interest of 1,200%, but also extra for the fees, length of time you have borrowed for, and interest on the interest!

So a short term loan can be a useful solution to a short term cash flow crisis and a relatively cheap way of borrowing for 31 days. Problems with short term loans only tend to occur when customers roll over their debt or start to rely on them to supplement their income month after month.

Credit Score

It is also necessary to bear in mind your credit score. If you have poor credit, then your choices will be limited to online short term lenders, who offer credit without penalising you for poor credit history. If however, you have a good credit record, then you might want to consider cheaper options for borrowing, such as extending your overdraft.

Finally, in any situation, with any loan, also remember that a loan involves a promise to repay. Always makes sure you can actually afford a loan before committing yourself to debt.

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