Which is the best type of loan for you?
The difference between secured and unsecured personal loans??
If you find the whole topic of loans confusing, you are not alone. Many people are unclear about the different types of loans available, and also find the thought of applying for a loan stressful. A lot of us are embarrassed about anything to do with money, particularly if we are running into financial difficulties.
So in this article we want to explain about the two main types of loans, and explore the advantages and disadvantages of each.
These two types of loans are secured loans and unsecured personal loans.
Secured loans are based on the value of an existing asset such as your home or car. That asset is used by the lender as a guarantee that they will get their money back, even if you are unable to repay the loan. So for the duration of the loan, they have a claim on your home or car. This means that if for any reason you could no longer make loan repayments, the lender would ultimately be able to take your home or car instead.
So a secured loan has the obvious disadvantage that there is a risk to your home or car. But because the lender has this security, it may be easier for you to get a secured loan, and there may be a lower interest rate.
Unsecured personal loans
With an unsecured personal loan there is no dependence on any of your existing assets. The lender will base their loan decision simply on whether they think you will be able to make regular loan repayments.
The advantage of an unsecured personal loan is that there is no risk to your home or car. In fact, you do not even need to own a home or car to be eligible for an unsecured personal loan.
If accepted for an unsecured personal loan, you will be able to borrow a fixed amount of money over an agreed repayment term. The rate of interest will also be fixed, so that you know exactly what you have to repay and for how long you need to make those repayments.
The main disadvantage with an unsecured personal loan is that many lenders will not agree to lend to you if you have a poor credit score. And the problem is that if a lender rejects your loan application, then this information will usually appear on your credit history as well, which can make it even more difficult to find another lender willing to lend to you.
This is one of the main reasons that puts people off applying for a loan. It’s the fear and embarrassment of being rejected, and also the worry that if you are accepted, will you be able to make the repayments or might you end up in a mess?
Let’s take a look at how things ideally should work.
Can you get an unsecured personal loan with poor credit history?
The simple answer to the above question is yes.
But there is a fine balance to be maintained here. Lenders need to be both responsible and compassionate. A responsible lender will never lend money to someone if it is obvious that they are not in a position to make the loan repayments and will just slide further into debt. Yet a compassionate lender will treat every case on its merit, rather than applying inflexible lending criteria without carefully examining all the facts.
At Loans2Go we like to think that we have the balance right. Our main priority is that you don’t try to borrow more than you afford to repay. That doesn’t help anyone. But we are open to lending to you even if you have poor credit history or a CCJ. We recognise that it can be easy to get into financial difficulty, even through no fault or your own, but that circumstances can and do change. If you are now in a stronger position financially, and are able to make loan repayments, then we will consider lending to you even if your credit history is not good.
Loans2Go offer unsecured personal loans of between £250 and £3,000 over a repayment period of up to 24 months. We do not charge set up fees, and if you are able to repay your loan sooner than agreed we won’t charge you for that either. We also aim to get your loan money into your bank account within 15 minutes if you are accepted for an unsecured personal loan with us.
So if you are interested in finding out more about our unsecured personal loans, do get in touch with Loans 2 Go online or email us on email@example.com. You can also call us on 0330 400 0403, or WhatsApp on 07741 903 315.
Check back here soon for more financial and lifestyle tips from Loans 2 Go.