Borrowing Money Can Be Risky Business

It’s a sad fact that for many of us in the UK, the purse strings right now are stretched tight as a drum. What’s more, with the economy in a current state of flux, it doesn’t look like things are going to get better any time soon. A loan is not the first place you’ll look of course; in fact it’s more often than not a ‘last case scenario’ that carries with it legitimate concerns. But if the well has run dry and you can’t see any other way to logistically dig yourself out of your financial pit (short of robbing a bank or rigging the lottery) then there are numerous loan options to consider.

Its Risky Business

If you’re only in need of a relatively small amount of money (say for a new car or possibly a much needed holiday that you can’t REALLY afford) then you’re better off with a secured loan as the risks are minimal and as long as you use a respected lender (you don’t want any back-door dealers coming round to break your legs when you fail to make payments) there will be no dramatic repercussions should you fall into even more drastic financial disarray.

Of course secured loans are hardly ideal and do carry an element of risk as they require loanees to essentially use their house as collateral but the APR on secured loans is generally significantly lower than with their unsecured counter-parts. Consider it like the difference between riding a bike with stabilisers and riding a bike without stabilisers. There’s less chance of getting hurt with the safety wheels on but take them off and you can cover far more ground and much faster at that! It might be a little riskier taking out a secured loan as the ‘security’ is going to the lenders and not the loanees but the amount available to you and the flexibility of the loan will be significantly more appealing.

Can I Apply for One

Perhaps the most intriguing aspects of secured loans is that (in the UK at least) they are available to anyone, regardless of their credit rating (as long as they are property owners) and the amount available is significantly larger. You’ll VERY rarely get an unsecured loan for any more than £25,000 but with an secured loan you could borrow up to at least £75,000 meaning if you’re looking at buying a house and don’t want to take out a second mortgage, a secured loan is a legitimately sound alternative. Secured loans also tend to last longer in order to off-set the lofty set-up costs, up to 20 years in fact with monthly repayments decreasing drastically depending on the number of years it takes the loanee to pay off the loan. Of course it is also worth taking into account however, that the longer the loan repayment, the larger the APR.

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So now you’ve made the decision to apply for a secured loan, good for you! But there are hundreds of lenders out there hungry for your custom, each with variable APR rates, variable profiles and variable morals. The most obvious place to start would be your mortgage lender, who in theory should be able to offer you a decent deal as you are an existing customer. If we’re being honest with ourselves though (and why shouldn’t we, this is a lot of money we’re talking about after-all), your mortgage lender should only be the first place so you have a decent benchmark against which to compare subsequent offers. There might be a vague feeling of dishonesty attached to this move but there really shouldn’t be, just ask yourself the question; would THEY offer YOU the same courtesy?

Compare the Market

When you have a comparison point to work from the internet awaits and considering it seems like there are now more comparison sites than there are sites to compare, there is no short order of sites (most of which are free to use) that can be used to compare hundreds of offers in seconds. Most lenders will use a similar set of criteria to judge your specific case. Of course the interest rate will depend on the size of the loan, it’s length and your credit rating but different lenders will also operate under different terms so as tedious as it might well be (let’s be honest, who EVER really reads the ‘terms and conditions’?) it is in your best interests to read through each offer thoroughly and not just go instantly with the cheapest offer.

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