There are so many different types of loans on the market and it can be quite overwhelming deciding which one will be right for you. You may be looking to fund a home improvement project or consolidate existing credit, whatever the reason, we take a look at the different types of loan available, as well as their key benefits and drawbacks.
A secured loan, such as a kitchen loan from Nemo Personal Finance is ‘secured’ against your home, so always make sure you can afford the repayments. The advantages of a secured loan is that they offer a higher loan amount and a longer repayment term than loans which are un-secured. This means you can make a big purchase such as a home improvement project or consolidate existing credit without having to juggle multiple repayments each month.
An unsecured loan is not secured against anything as there is no collateral involved, making it lower risk for the borrower as they don’t stand to lose their valuable assets. They are usually smaller amounts over a shorter period of time in comparison with secured loans.
However, there are still considerable consequences to face if repayments are late, such as bankruptcy or being forced to repay the amount by the courts. Sometimes legal actions can change the terms of the loan so it becomes a secured loan, so you are still at risk of losing your property if you fall behind on repayments.
Mortgages are loans specifically designed for buying a home. They are different from personal loans as they require a deposit of at least 5%, though the bigger your deposit the better deal you’ll get. They also usually last longer than other loans.
Mortgages are secured against the home that you are buying, so it will be repossessed if you don’t keep up with the repayments. Take a look at the top 10 tips when choosing a mortgage from Moneyfacts for help deciding on which mortgage is right for you.
A credit card is issued by a credit card provider, and is designed to pay for things online or in shops, to be billed later. It is sensible to use a credit card when paying for expensive items such as household appliances, but bills can mount up quickly so make sure to keep track of spending.