Finance options to suit different needs

Although the UK has seen credit conditions become far tighter over recent months as a result of the global credit crunch, there are still many different types of finance available these days to suit a wide range of conditions.

No matter what you are looking to take finance out for, and whatever your circumstances, there is a good chance that you can find a suitable financial solution if you spend some time researching the market.

It is important that you always check eligibility requirements for any sort of finance in order to make sure that you apply for the most appropriate form of finance, and with a wide range of lenders available offering different forms of finance you also need to make sure that you compare different deals from a number of lenders in order to optimise your chances of getting the best deal.

It is important to remember that different forms of finance are likely to suit different needs and circumstances, so you should take some time to assess your own needs and circumstances before you start making applications, otherwise you could find that you are wasting your time.

Do bear in mind that there is a greater chance of getting turned down for finance these days, and this is because many lenders are having to be careful about who they lend to due to difficulties in obtaining finance to fund their lending – keep this in mind when making applications, and don’t waste your time applying for finance that you will not be eligible for.

For example, if you have bad credit, target lenders that specialise in loans for those with bad credit rather than mainstream lenders, otherwise you could end up with a rejection and a black mark on your credit profile.

Below are summaries of some of the different types of finance that are available these days:

Secured loans: These loans are available to homeowners, and the money that you borrow is secured against the equity in the property, which is the value of the home minus any outstanding mortgage or other secured loan.

You can enjoy impressive borrowing power (based on equity levels and financial status) with these loans, and longer repayment periods mean that you can spread your borrowing over a longer periods in order to keep your monthly repayments down.

Often, those with bad credit are able to get a secured loan even they cannot get an unsecured one, but you do need to be a homeowner in order to get one of these loans. One major risk with a secured loans is that your home could be at risk if you do not keep up with repayments, but if you make timely and responsible repayments this can be an effective way of borrowing.

Unsecured loans: An unsecured loan is available to both homeowners and non-homeowners, but you will usually need to have good credit in order to get one of these loans. Eligibility is based on financial and employment status, income, outgoings, age, and various other factors.

The loans are generally available for a maximum of £25,000 subject to status, and can be taken over a maximum term of 5-7 years with most lenders, although some do offer slightly longer ten year repayment terms. This type of loan is not secured against any asset, and is based on contract. If you default on repayments you will not risk your home but you will affect your credit.

Credit cards: If you are looking for a convenient, simple, and flexible way to make purchases then a credit card could suit your needs perfectly. A credit card enables you to make purchases up to your credit limit and then repay the balance over a period of time.

Depending on the type of credit card that you have you may even be able to earn rewards, cash back, or enjoy interest free credit for a longer period of time. There are many different credit cards to choose from, and it is advisable to compare the various cards and learn more about the benefits of each type so that you know which one is going to best suit your needs.

Payday loans: A payday loan is a short term unsecured loan that is made available for around one month, although you can extend this and pay the necessary fees and interest depending on the lender.

These loans are suitable for those in employment who need some cash to tide them over until payday for unexpected expenses or bills. The borrowing levels are low, with maximum borrowing usually set at under £1000, although the amount that you can borrow is dependent upon your income and other factors. A credit check is not usually necessary for this type of loan, but you will need to provide other documentation such as proof of income and proof of address.

Mortgages: If you are looking to buy a house then you will most likely need to take out a mortgage, and you can enjoy a choice of different mortgage products designed to meet different needs.

You should bear in mind that there are restrictions in place on some mortgages at present due to the effects of the global credit crunch, but those that act quickly – and particularly those with decent credit and a good deposit – should find that there is a decent choice of affordable mortgage products available that could suit their needs.

Make sure that you look at the different mortgage products available and what the pros and cons are before you make a decision, as a mortgage is an important, long term financial commitment.