Confused by the massive array of loans available to you today? Feel if you wanted to that you could buy a house, a yacht or a dream holiday in a matter of minutes, but want to make the right decision by taking out the most appropriate loan?
There are numerous ways to borrow money:
• Secured loan – An advance on your mortgage (see detail below)
• Unsecured personal loan – Tends to cost more in interest and needs to be paid off quicker than a secured loan.
• Credit card – If you pay off your balance every month in full, this costs you nothing. However, if you don’t, interest rates can be high and can outweigh the initial amount that you borrowed on it. You will be charged if you miss a payment and some charge an annual fee.
• Store card – Similar to a credit card, although the interest rates can be even higher. Not a problem if you pay the balance off every month, but it soon adds up if you don’t.
• Hire purchase – Used for buying expensive items, such as cars or kitchens, but tends to have a high rate of interest and a much shorter repayment term than a secured loan.
• In-store interest free credit deals – Often they are only interest free for a certain period. If you do not pay off in full during that time, you could be landed with a hefty interest bill.
• Current account overdraft - Access to a monthly amount of money, that you pay interest on. It can involve high rates of interest, monthly overdraft fees and sometimes set-up costs.
However the advantages of secured loans are many and are well worth looking in to. A secured loan is a way of borrowing by releasing equity (money) from your home, to be used for a variety of reasons.
What can a secured loan be used for?
• To consolidate other debts – makes things more manageable
• To fund a wedding – do it in style
• Pay for a dream holiday – ever feel life’s too short!
• Do vital maintenance to your house – prevention is better than cure
• Buy a new car – live the dream
• Build a new garage – add value to your property
• Create an extension on your home – much cheaper than moving house
The advantages of a secured loan:
• As the loan is secured against your property, so of less risk to the lender, the interest rates offered are generally far more competitive than an unsecured loan (such as an overdraft). Borrowing on the value of your home is by far the most cost effective way to borrow a lump sum. Even if you haven’t owned your property for very long, you will probably find that it’s value has probably increased more than sufficiently to make an advance a worthwhile and money-saving investment in what is probably your biggest asset.
• A sensible way to borrow money for expensive, one-off type products or experiences
• If necessary you will be able to reduce your monthly payments by paying the loan off over a longer term – as long as your mortgage if you choose. By taking out a secured loan your monthly repayments will be far more manageable than using a credit card or unsecured personal loan.
• Unlike other types of borrowing, homeowner loans can allow you to pay off the amount in line with the length of your mortgage. This can make repayments far more manageable, as a loan repaid over 20 years will involve substantially smaller repayments than one that has to be paid off over five years.
• You tend to be able to borrow larger sums than with unsecured loans, such as credit cards.
• If you have any outstanding loans that aren’t secured on your property, ideally pay them off. If this isn’t possible, add them to the homeowner loan, for a much more competitive rate – which will save you money in the long run.
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