Deciding Which Type of Personal Loan is Best for You

When you need to borrow money, you can get a personal loan from a bank or financial institution. This could be to take a holiday, buy a car, do home renovations, consolidate your debts or for your business or for a myriad of other reasons.

These loans are available with various lengths of terms and repayment options depending on your personal financial situation, your credit history and the amount of money you wish to borrow. In the UK, borrowers can choose either a secured personal loan or an unsecured personal loan.

Getting a secured personal loan is a straightforward process once you have property you can use as surety against the loan. This means you use your property as collateral and if you default on the loan, the lender can take this property and sell it to redeem the money you borrowed. If you use your home as collateral, you still live there as you normally do and once the loan is paid in full, the lender has no claim on the property whatsoever.

You will only have to move out if you don’t repay the money you borrow and the lender decides to foreclose. In the case where you borrow a large amount of money, the lender will need an appraisal of your property to determine if it has a value equal to or greater than the amount of the loan. You will need to have a solicitor to finalize the legal documents for the loan.

Even though there is a lot of paperwork associated with obtaining a secured loan, there are advantages to taking this option when you need a personal loan. The loan amount is spread over a period of time, which could be up to 25 years depending on how much your borrow, and you have a regular schedule of monthly payments.

Many lenders have flexible terms for repayment, such as allowing you to take a payment holiday once a year. The longer the term, the lower your monthly payments will be, which allows you to tailor the repayment to your budget. The interest rates on secured personal loans are also lower because of the decreased risk for the lender.

An unsecured personal loan is one in which you do not have to use any of your property as collateral. Getting this type of loan does not take a long period of time because there are no appraisals needed nor are there any legal documents to sign except for the ones from the lender. You don’t need a solicitor for this type of loan.

These loans are the perfect solution for tenants and those who do not own property to obtain a loan for their personal needs. There is a greater risk for the lender in approving unsecured personal loans so the interest rates are therefore higher. If you should default on the loan, the lender has no security to fall back on to redeem the money you borrowed.

In spite of the higher interest rate, there are advantages to applying for an unsecured loan. You don’t have any property at risk and you can borrow up to £25,000. Depending on how much money you borrow, you can have terms from 6 months to ten years for repayment.

Even those with a bad credit history can apply for a personal loan and when you make your payments on time, you can get started on repairing your damaged credit. You will likely have a higher interest rate attached to the loan than a person with excellent credit would, but you can still get either a secured or unsecured personal loan.

If you are looking for such a loan to combine your debts into one lower monthly payment, lenders look kindly on this move and are more than willing to help you.

With the ease of the Internet and many lenders having an online presence, it is easier than ever before to search for an affordable personal loan online. You can do this from the comfort of your home at any time of the day or night. Browsing the various sites and experimenting with the free loan calculators that the lenders have available won’t cost you any money and you don’t have to submit an application to get the information you need. Therefore searching for a loan in this manner will not have any effect on your credit rating.

You have the option of requesting free quotes from several lenders and receiving relies by email, so you won’t have to speak to a loans officer. There are also experienced brokers for personal loans that you can use and they have an online presence as well. This eliminates having to take time off work to visit several lenders for information. A broker offers your loan to multiple lenders and then brings the results back to you. You choose the loan agreement that best suits your needs and then you submit an application.