Finding a loan during a credit crunch

Although the global credit crunch has seen a reduction in the number and affordability of loans for consumers, there are still many different loan types and options out there, with different loan solutions to suit different needs and circumstances.

You will find that whilst some lenders have withdrawn various loan products from the shelves and many have tightened up their lending criteria, there is still a choice of loan types and options on offer. It is important that you find out about the different types of loans on offer, and what the pros and cons of each type are, so that you can find the most suitable option for your needs.

In addition you should also make sure that you check the eligibility requirement for any loan that you are considering applying for, as otherwise you will end up with a rejection that could tarnish your credit profile.

You can find out about the different types of loan options with ease and convenience using the Internet, and you can also browse, compare, and even apply for your chosen loan via the Internet, so the whole process can be quick, easy, and hassle free.

Below you will find some general frequently asked questions relating to loans:

I need a loan but do not own any assets. Can I still get one?

If you are a non-homeowner you can apply for an unsecured loan, which are loans that are available both homeowners and non-homeowners. These loans are available for a maximum of around £25,000 subject to financial status, and offer repayment periods of up to seven or ten years in some case, although the standard repayment period is five years.

If I am a homeowner what sort of loan can I get?

If you are a homeowner you will have access to both unsecured and secured loans depending on your credit and financial status. You should make sure that you weigh up the pros and cons of each so that you make the right decision with regards to the right loan for your needs.

Will I need to have good credit to get a loan?

This depends on the type of loan that you want. If you want an unsecured loan then you will usually need to have good credit, as these loans are higher risk for the lender due to lack of collateral. However, many secured lenders will consider those with damaged credit for a secured loan, which is secured against the home. You will get charged a higher rate of interest if you have bad credit though.

What are the pros and cons of an unsecured loan?

The advantages of an unsecured loan are: you do not have to be a homeowner to take out an unsecured loan, you will not be in debt for decades, unsecured loans are pretty quick to process so you can get the money quickly, and you can use the money for any purpose.

The disadvantages include: you will need to have good credit to get an unsecured loan, the repayment periods are shorter than with secured loans, and the borrowing power is not as great as with a secured loan.

What are the pros and cons of a secured loan?

The advantages of a secured loan are: you can enjoy greater borrowing power depending on equity levels and financial status, you can enjoy longer repayment periods that will help you keep your monthly outgoings down, you can release the equity in your home without selling up, and you stand a good chance of getting finance even if you have bad credit.

On the downside you could be putting your home at risk if you fail to keep up with repayments, you could fall into negative equity if house prices fall, and you could be lumbered with debt for many years.

I want to pay off my existing debts with a loan – can I do this?

Yes, you can take out a consolidation loan with which to pay off your existing debts, such as credit cards, store cards, and high interest loans, which could be costing you a fortune each month.

By finding a low rate consolidation loan you can reduce the amount that you have to pay out and reduce the number of debts that you have to deal with. Consolidation loans are available on both a secured and unsecured basis depending on your needs and circumstances.

Is it worth taking out a loan to improve my home?

It can be worth doing this depending on the type of improvements that you wish to carry out. A home improvement loan can be used to carry out all sorts of jobs, but some may not add any value to your home.

However, some improvements, such as conversions, adding extra space, replacement windows, improved heating, etc, can add value to your home, and this could help you to recoup some or all of the cost of the loan through the increased value of your home.