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Types of Unsecured Personal Loans (Page 1 of 2)
Even consumers who practice careful spending habits can sometimes find themselves in financial trouble. Unexpected expenses such as car repair bills or medical costs can strain your budget and leave you wondering how you will make ends meet. Fortunately, there are several types of a secured personal loans in the UK that can help you through difficult financial times. It is important to consider these loans carefully to ensure that you are choosing the right type of loan for you.
Payday Loans
A payday loan is a short term loan that can help you through a financial emergency. The process of qualifying for this type of loan is relatively simple and typically requires little documentation. For this reason, you might be able to obtain approval or a payday loan and receive the funds you need in as few as one or two days. In some cases, you can even obtain a payday loan without a credit check or income verification.
Before opting for a payday loan, you should consider the drawbacks of this option. In most cases, you will have to repay the loan amount, plus interest, within one or two weeks after you receive the funds. Although this might be appropriate for a financial emergency, a payday loan might not help you if you anticipate that your financial needs will last for a longer amount of time. Also, compared to other types of unsecured personal loans, payday loans typically come with high interest rates. You might have to pay 25% interest or higher in addition to the principle amount for the privilege of borrowing money for just a week or two.
Personal Bank Loans
A personal bank loan is issued by a bank or other financial institution instead of by a payday lender. This type of loan is generally designed for longer-term financial needs – depending on your circumstances, you might be able to borrow the funds for five years or longer. This might be an appropriate option if you want to consolidate existing debts or anticipate that your recurring extra expenses will last longer than a few weeks.
Banks and financial institutions require substantially more documentation than payday lenders when evaluating applicants. You will likely need to provide verification of your income and expenses, as well as documentation of your personal assets and other debts you owe. You will also have to fill out a lengthy application and may have to meet with a personal lender in order to receive approval for your loan.
Compared to payday loans, interest rates for personal bank loans are typically low. This option can help you obtain the long-term funds you need without costing you a small fortune in interest charges. Of course, this type of unsecured loan typically requires a thorough review of your credit history. The interest rate you obtain a for a personal bank loan can vary significantly depending on the length of your credit history and whether you have made your other account payments on time.
Unsecured Credit Cards
Top 5 Things to Consider When Making a University Loan Comparison
With the cost of education higher than ever, it’s commonplace for people in the United Kingdom and elsewhere to rely on educational loans to pay for their classes. These loans can have a severe effect on financial stability later on. Doing a good loan comparison before you sign an agreement can save you hundreds of pounds, especially if you’re thorough about examining the following elements.
Credit Check
Depending on where you go for your university loan, you may be subject to a credit check. If you are younger, this can be problematic, because most students who are just starting out on their own haven’t established much of a credit history. You might need your parents or someone else to cosign for you, which makes the loan more complicated.
Interest
You probably know that you should try to get the student loan that has the lowest rate of interest, but there are other things to consider as you compare loan options. For instance, does interest start to immediately accrue, or are the calculations delayed until you graduate? These kinds of elements have a big effect on your ability to pay back the loan and how long you’ll take to get out of debt.
Payments
Similar to interest, you will want to compare when you must start making payments. You should look at the amount you would need to pay every month and make a determination about whether that figure is reasonably within your budget. Your goal should be to find a payment level that allows you to pay down your debt while still living a somewhat comfortable life. Keep in mind that, in general, the longer your loan term, the more you’ll usually pay in interest, but the lower your monthly payments typically are. Compare how much of your payment gets applied to the principle balance, as well as what happens to the loan in the event you become disabled.
Another thing to consider under payments when you’re looking at different loans is whether the lender allows forbearance or deferment. These two options basically allow you to pause paying down the debt. Most people do not want to think about needing to do this, but the reality is that, if you get into financial hardships down the road, you might not be able to meet all your debt obligations, including your student loans. In this circumstance, having the option for some breathing room can be good.
Benefits
Some lenders that provide school loans offer additional benefits as part of the loan agreement. For example, they might offer you perks such taking a specified amount off your balance (essentially giving you a discount) if you make a set number of payments on time. Others might give you a slightly better rate of interest if you agree to conditions such as working online or setting up automatic payments.
Loan Limit Amounts
Loan limits are important to look at when you are comparing sources for university funding because they can mean you need to use multiple lenders to cover your costs. Ultimately, this makes paying for your schooling more complex, but several smaller loans might be worth this complexity if you are able to get lower rates of interest. As an example of loan limits, in England, you can get a maintenance loan from the government of up to £4,418 for the 2014 school year if you are living at home, whereas the amount increases to £6,600 if you want to study abroad. Remember, just because you are eligible to borrow a certain amount doesn’t mean you must do so–live within your means and only borrow what you really need to cover your costs.
Conclusion
A thorough loan comparison ensures you get the best deal and fit when you must borrow to cover the cost of university. You should look at elements such as the necessity for a credit check, the way the lender treats interest, payment amounts and options and benefits such as routine-payment discounts. The cap on the loan amount is another big factor. As you go through the comparison process, don’t be surprised if getting the information you need takes time. It helps to start looking for providers well before the semester or school year is scheduled to start.