When you look to take out any kind of loan, you'll always be faced with dilemmas and choices. Whichever loan you decide to go for, it's usually the options that surround each one where it can get confusing. However, the first thing to decide on is whether your loan will be secured or unsecured. Almost every loan available on the market today is one or the other, so which is best?
Though unsecured loans are a bigger risk for lenders, they are more widely available and come in several different guises such as a credit card or personal loans. Also, they don't usually require any form of security or assets and could have greater flexibility in terms of repayment options.
But for all these benefits, even the highest loan amounts are lower than with a secured loan. Rigorous credit checks are undertaken to prove you're credit worthy and capable of paying the loan back in full. Plus, if you have a low income or had credit problems in the past, it can make it much harder to take out an unsecured loan.
If you're successful, you'll need to ensure your budget can handle the repayments. Many unsecured loans have a higher rate of interest that could cost you more in the long run. If you miss any payments or can't pay back the total amount, it will affect your credit rating making it harder to borrow again in the future.
A secured loan is the type of loan that is protected by a valuable asset or item of collateral. It's a lower risk to lenders who can offer larger loan amounts because, as the name suggests, you'll be providing 'security', whether it's a house or a car, to help borrow the money.
Though credit checks are usually still applied to ensure a creditworthy background, the process is more focused on the security you can provide. The lender sees the high-value item that's offered against the loan as a guarantee that you'll repay the loan in full and therefore retain ownership of it.
It does mean, however, that the lender has the right to take possession of the item if the loan is not paid back in full, including fees and charges. This will affect your credit score in the same way as if you defaulted on an unsecured loan.
A secured loan on your car
One of the easiest and quickest ways to get a larger sum of money is to take out a secured loan on your car. Often known as a logbook loan, the process involves getting a secured loan with your car being the valuable security against it.
There are several trustworthy lenders available to you and a few have already helped thousands of customers withdraw the cash from their cars and make the process nice and simple. Some companies offer NO formal credit checks, so as long as you own your car and it's free from finance, there's no reason why they won't help you.
It is important you do your research before purchasing to a loan company. Many offer hidden fees and charge you penalties for paying back the loan early. This can come as a nasty surprise to many people once they have already been tied into a contract.