What Types of Loan Are Available

In the current economic climate where loans are not so readily available as they used to be it is useful to know what your options are before applying for a loan.Secured LoansA secured loan is a loan that is secured on your property, and is available to people that have a mortgage on their property who also have enough equity left in their property. The maximum LTV (loan to value) allowable if you have a good credit history is currently 85% i.e. the total of your loan and mortgage debt must be less than 85% of the value of your property. One of the main benefits of a secured loan is that the lender is more likely to lend you money because they put a second charge on your property (behind the charge that your mortgage lender has in place) which makes the loan a safer bet for them if you default on your repayments. You can also borrow larger loan amounts for longer terms than you can with an unsecured loan.Unsecured LoansAn unsecured loan is a loan that is underwritten based on your personal circumstances, i.e. the lender will look at your income and your outgoings and they will also look at your credit record. Although the loan is unsecured the lenders are more likley to lend to homeowners than they are to tenants, for the simple reason that should you default on your repayments the lender will look to put a charge on your property in order to recover their money. Unsecured loans are generally available for smaller amounts usually up to £15,000 and for shorter terms they are also only available to people that have a good credit record with no CCJ’s defaults or any other type of bad credit problem.Guarantor LoansA guarantor loan is a loan that is offered to people that can provide a suitable guarantor (co-signee), the applicant does not need to have a good credit record as the loan is underwritten on the guarantor’s credit record. To be suitable the guarantor must be an employed homeowner with a good credit record. If the applicant defaults on the loan in any way the lender will go to the guarantor to reclaim their money, which is why the lenders are not too worried about the applicants credit record. The main benefit of this type of loan is that it is available to people who have bad credit, CCJ’s default’s etc, and can be used to help towards improving your credit record by maintaining your repayments. The main problem with this type of loan is the interest rate that is charged is usally higher than any other type of loan.Payday LoansA payday loan is a short term loan for a small amount of money usually up to £1,000 that is repaid in full on your next payday. To qualify you will need to be in full time employment and be paid directly into your bank account, you will also need to be aged 18 or over and have a debit card. They should only be used as a stop gap loan to get over any short term difficulty that needs to be dealt with before your next pay cheque. The interest charged is usually quite high, in most cases the lender will charge £25 for every £100 that you borrow. The biggest draw back is that you must repay the loan in full on your next payday, which is why you must have a debit card associated with your bank account, because the lender will automatically deduct the full amount from your bank on your next payday.Logbook LoansA logbook loan is a loan that is secured on your car log book. Loans are available up to £25,000 and to qualify your car must be free of finance and you must be aged 18 or over and the legal owner of the car. This type of loan is available no matter what your credit history but the interest rate that is charged is usually quite high (you should always check how much the loan will cost you before you sign the agreement).Personal LoansA personal loan is another name for an unsecured loan and as such is only available to people with a good credit history and for amounts up to £15,000 and for terms up to a maximum of 10Years in most cases the lenders will only lend for up to 5 year terms.Debt Consolidation LoansA debt consolidation loan is a loan that is taken out in order to consolidate any loans, credit or store card debts into just one loan in order to reduce your monthly commitments and can be secured or unsecured. When used wisely a debt consolidation loan can help to reduce your monthly commitments and get your finances back on track. However if you take out a consolidation loan it is always advisable to destroy your credit and store cards to ensure that you do not start accumulating your debts again. Failing to do so can often leave you in a worse situation than you were in the first place.