FNTN

Getting a personal loan could just make you want to jump for joy .

Introduction.

There are a great many types of personal loan finance products for you to choose from. However, broadly speaking they fall into one of two categories; secured or unsecured personal loans. Generally speaking you would only seek to take out a secured personal loan to borrow money for something that required a very large amount of money and was to be repaid over a long period of time. Whereas, an unsecured personal loan would be used for relatively smaller amounts of money, that are typically repaid in a few years if not months.

Secured personal loans.

As stated above a secured personal loan would normally be taken out only for a very large amount of money, which you would then need to repay over a long period of time. As the loan is for a large amount and the repayment period is a long one, the lender is incurring a potential risk that you might not be able to repay all of the loan. So the lender ‘secures’ their loan against something of value to you, to act as a guarantee for them that they can recover their outlay, if you default on the repayments. Perhaps the best example of a secure personal loan is a mortgage. The lender arranges for the finance of the property you want to buy. This will require a loan of hundreds of thousands of dollars that you will need to repay over 20 or 30 years. A mortgage lender typical ‘secures’ their loan against the property that you’re buying. This means that should you fail to repay all of the money – then the home you’ve been buying becomes the property of the mortgage lender. Secured personal loans are often only required if you need to borrow more than $50,000.

Unsecured personal loans.

If you’ve just read the information above about secured loans, then it’ll be pretty obvious that you can have an unsecured personal loan without risking losing your home or other property/items that you own. An unsecured personal loan does present a greater risk to the lender, as if you default on the loan repayment it would be more difficult for the lender to reclaim the money owed. However, on the basis that unsecured personal loans are for smaller amounts of money and are repaid relatively quickly, most personal loan providers accept those risks. Unsecured personal loans can be taken out for amounts ranging from $500 to possibly as high as $50,000 with typical repayment periods between 6 months and 10 years.

Finding personal loans.

You'll find some great deals looking for personal loans online.

Finding companies willing to advance you cash as a personal loan has never been easier. All you need to do is put something like “personal loans” into an online search engine on the internet and work through the list of companies it suggests. However, you can save yourself some time on this by being a little more specific as to what you want the loan for. For example, if you are going to buy a new home, then you really need a mortgage loan, so make “mortgage loan” the term you search for; similarly for auto loans or student loans etc. It might be that the company at the top of the list you see from the search engine does offer the best deal for you. However, you should always compare at least two or three offers and assure yourself that the finance company or bank offering to lend you the money is an established and reputable lender.

Small business and business development loans are often secured personal loans.

Typical secured personal loans.

With secured loans being required when a large amount of money needs to be borrowed they are typically offered as mortgage loans or to people looking to finance a new business or develop an existing one. However, as we all know there are many other things that can be very expensive to fund; and are certainly beyond just using any savings we may already have. It might be you want to organize a terrific wedding, or ensure your child’s education fees throughout all their school years or perhaps take out a three or four year student loan deal. Apart from mortgage and business loans, any of those other examples would require loans on tens of thousands of dollars – which could mean that you have to agree to a secured personal loan to fund them.

Typical unsecured personal loans.

New auto loans can often be unsecured personal loans.

It wouldn’t quite be correct to say that apart form the things listed above in secured personal loans, that for everything else you might want to borrow money for could be done as an unsecured personal loan. However, the reality is that it probably could. You may well think – but what about a new auto loan costing tens of thousands of dollars? Well, that is a bit of a grey area and can depend on the car you’re buying. However, in most instances a personal loan for a new auto, which is priced up to say $30,000, doesn’t have to be a secured one. So, unsecured personal loans can come in just about all shapes and pretty well any size. You might just need to borrow $500 to buy a new freezer or TV, or a couple of thousand dollars for a vacation, or perhaps $10,000 to add a sunroom to your home etc.

Getting the best deal with personal loans.

There’s no single rule for what will constitute the best possible deal for you in terms of a personal loan. However, if you wanted to borrow say between ten and twenty thousand dollars; and two companies make you offers, one as a secured loan the other as an unsecured loan – the unsecured one may well be the better option for you. This is because you won’t be putting your home or other valuable possession at automatic risk should you default on the repayments. However, that decision will need balancing against the fact that a secured loan will generally have less monthly interest on it and a longer repayment period. That means you can pay back less per month on the loan, albeit over a longer period of time, possibly meaning that you don’t overstretch yourself with your repayments. Also, look for loan agreements whereby if you can pay off the debt before the repayment period is up – then you also pay a reduced amount of interest on the loan.

Personal loans and bad credit scores.

Don't worry if you have a bad credit score - you can still get personal loans

Having a bad credit history and a bad credit score won’t necessarily prevent you from getting a secured or unsecured personal loan. However, for larger sums of money, even around the $10,000 mark or below, you might have to agree to secured loans. Whether you have a secured or unsecured loan you will have to expect to pay a higher rate of interest on it, than someone with a good credit score. This might seem unfair, having a poor credit history or score probably means you can ill-afford to pay a lot in interest. But, the lender is taking an increased risk in being prepared to lend you money and so can expect to pay more in order to be able to borrow money.