 In years gone by, if we wanted to borrow money we found we had little choice available. In fact you only really had the major high street banks & lending institutions, and if you didn't have a good credit record then your benevolent bank manager would have to be relied upon.
Borrowing amounts were heavily restricted, and even as recently as 10 years ago borrowing amounts of up to £10,000 wasn't normal, and in fact virtually unheard of. When we look at today's borrowing levels, you can plainly see that they are radically different in comparison. Collectively as a nation the United Kingdom owes in the region of one trillion pounds - you read it correctly, one trillion. This is in the most part comprised of mortgages, personal loans and credit or debit cards.
Of course we borrow so much money because it is readily available to us now. No more are we limited to high street vendors when we want a new car or a garden renovation. In 2006 there are endless options open to us.
Although the high street lenders offer some of the best competitive rates available in todays market, you can also log onto the internet to research the best rates for your personal loan, or even make a call to arrange in principle your loan needs in minutes via any of the growing number of finance companies.
A good place to start is an internet financial data comparison site such as www.moneynet.co.uk, who can help point you in the right direction for all of the latest best deals which meet your criteria. They will help weed-out the options which aren't right for your circumstances or needs, turning a bewildering choice into a simpler, more targeted list.
As an example, some loans will penalise you if you wish to pay your total loan off before it reaches it's term. You should of course always read the fine print in any situation, but more so with a personal loan. If you think you will pay off your loan early, get a loan which allows this.
Most loans are typically between three and seven years with monthly repayments to clear the principle. If you are looking to borrow between £1,000 and £25,000, your first thought may be a personal loan, at least it is for millions of people who need some extra cash. There are thousands of vendors now offering to use a loan to consolidate other loans, such as credit cards and bank overdrafts. Of course you can also buy something with it!
Mostly these days, the more you borrow - the cheaper your interest. Let's say you want to borrow £1,000, you could be looking at rates as high as 18%, typically because the costs for administration are so high when a loan is arranged. Maybe you should consider putting small loans like this on a low cost credit card, or maybe a bank overdraft.
So what if you want to borrow more than £1,000? Well, as discussed you may opt for a personal loan. Borrow £25,000 over a long term such as 5 years and you could be paying as low as 6% interest on your loan. This is very cheap borrowing.
Oh no, there are other considerations - insurance. Payment protection insurance will bump up your loan repayments BUT could protect you in the case of you not being able to make a payment through accident, sickness or unemployment. Although this sounds like a good idea, there are circumstances where you may not be covered. There are usually clauses in the small print (which gets smaller every few years), which may cause you significant problems. If you are on short term work contracts, self employed or have a medical condition which may cause you to miss work, you may find that the terms and conditions will not only make you policy worthless, but also not pay out when you need it to.
Then you have the quandary of secured on unsecured loans. Both options are available to most people but many loans are found in the unsecured genre.
As the name suggests, secured loans are indeed arranged on the assumption that you have something of worth as collateral. Usually this is your property, your home. This way if you default on the loan terms, the lender can take control of your property. There are benefits of a secured loan. Since the lender has reduced risk, you can borrow more, sometimes up to £100,000 - but you may need to put the deeds of your home for security. You also have much longer to repay, from 5 years to 25 years, although if you wish to finish your agreement early you will normally get ‘fined' for early repayment, usually a few months of interest. Check your agreement carefully.
And when you see ‘Your home may be at risk if you do not keep up the payments secured upon it" you better believe it!
Unsecured is exactly the opposite. No security needed, which generally means you are paying a slightly higher interest rate and the amounts you can borrow are lower - normally in the £1,000 to £25,000 range. The repayment term is less also, between 12 months and 60 months (one to five years, sometimes seven years).
So if you have mounting debts, or several credit cards with a balance you can ‘spread' them with a small personal loan, likewise if you want to make a relatively large purchase, use a loan instead of your credit cards - it could save you thousands.
And remember - your house is at risk, so keep your payments regular and decisions careful. |
