Which Loan Is Right For Me?

Choosing the right loan can be difficult, and often depends on whether you can tailor a loan to your current financial situation. Finding the right loan also comes down to the amount of risk that you’re willing to take on, as well as whether you have any assets that you feel confident enough to use towards a loan. Some of the more common options that you can take for finding the right loan include secured loans, unsecured personal loans, and bad credit loans. At the same time, it’s important to understand your credit score, and how you might improve it to get access to more favourable loans.

Secured Loans

A secured loan is typically taken out as part of a mortgage agreement, and involves using a valuable asset as a way of ensuring good terms of a loan. In the case of a mortgage, the property itself is used as collateral towards the loan. Having this asset in place means that lenders tend to reduce interest rates and lengthen the repayment schedule on a loan, with the understanding that they can repossess or foreclose on the asset if they need to. In this way, those considering a secured loan should always be aware that they are taking this risk, and shouldn’t enter into one lightly.

Personal Unsecured Loans

Perhaps the most common type of loan, an unsecured personal loan can be taken out up to various amounts, and can be for anything fro redecoration to car payments to plastic surgery or a holiday. Interest rates and contracts for these loans can vary considerably, which means it’s important to compare as many different companies as possible in terms of their rates. Some unsecured loans will also include borrowing limits, and particular fees that contribute to an overall annual percentage rate.

Understand Your Credit Score

A credit score is produced based on the kind of borrowing you have undertaken in the past, as well as from your employment and address records. These scores are generated by companies in the UK such as Experian, Equifax and Callcredit, and can vary quite considerably. Lenders use these scores to work out if you’re suitable for a loan. A poor credit score will negatively impact your eligibility for a favourable loan. If you are having problems with getting a loan, it’s worth contacting credit companies for a copy of your report, as there may be basic mistakes that are dragging down your score.

Bad Credit Loans

Another option is to explore bad credit loans, which can be a good idea if you’re suffering from a bad credit score. These loans can be issued on a fixed rate basis, and are often offset by higher APRs than an average loan. However, the cost of a bad credit loan can be reduced by using a guarantor, who agrees to make your repayments if you cannot. Having this extra security means that you can make payments and gradually improve your credit. Longer term credit loans are preferable to monthly payday loans, which involve very high APRs if you fail to make a repayment within a month of taking out a loan.

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