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  • Lions and Loans: Why Finance Should Always be Personal

     

    Different types of loans are available for almost every aspect of your life: personal loans, car loans, secured and unsecured loans, home loans, homeowner loans, student loans, graduate loans and career development loans (CDL). If you've suffered from credit problems in the past and now hold sub-prime characteristics, then you will be eligible for adverse credit and adverse loans.

    You can always borrow money these days, but it is crucial to read the small print as the difference between interest rates is enormous and stories of people forced to pay off amounts which are five times the amount of their original loan are not uncommon.

    There are also numerous stories on unemployed couples being sold loans, such as the case of Julie and Kevin Davies, reported by the BBC. The couple were already experiencing difficulty in paying off their existing debts of Ј4,000, when they were sold another Ј20,000 loan by Lloyds TSB.

    Loans of Ј1,000 to Ј25,000 can be taken out and repaid over a period typically varying between six months and 10 years depending on your credit history and available finances. Loans are usually secured or unsecured. Secured loans are tied to your house, so you can be forced to sell the house if you are unable to make the repayments. Unsecured loans do not impose the same restriction, though a default on repayments may result in being "credit blacklisted". Once blacklisted, you may get future credit card, mortgages and hire purchase applications rejected, as well as face a potential higher rate of interest for all existing debts.

    Do read all the terms and conditions carefully and ask friends, family and your financial adviser / bank adviser if you don't understand a particular statement. The annual percentage rate (APR) is particularly important and can make a difference of thousands of pounds over the term of the loan.

    * Requesting a typical amount for the loan

    * Discussion of interest rate (APR) and possible loan payment protection insurance

    * A credit check, you may wish to get one of these first, so you know what to expect

    * Reading the terms and conditions and then signing the agreement

    * Money can then be transferred into your account

    In the discussion of secured versus unsecured loans, moneynet explains that although secured loans can offer lower interest rates and repayments, many people do not wish to jeopardise the potential loss of their home in the default of a repayment of a secured loan. In unsecured loans, pay attention to the difference in APR, term of the loan and any additional charges such as an early settlement charge or redemption penalty.

    Resources:

    About Rachel Lane:
    Rachel writes for the personal finance blog Cashzilla:
    Rachel is a disillusioned, disaffected and broke graduate, exploiting new media for financial therapy.

    Phone: 0131 561 2251

     



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