Most people have been there: needing money urgently but not really having enough in handy. This is where loans come in and help. There are many types of loans available in the market today, but the choice of loan should be dependent on one’s situation and circumstances. Are you looking for a loan? Here are some examples of options you might opt for.
The unsecured loan
This is basically a personal loan which is not connected to one’s assets. The loan is issued based on the credit profile of the borrower and the economic circumstances, and not necessarily what they can offer as collateral. Most of the time, they are offered for lengths ranging from 1 to 7 years, with borrowing levels of up to £25,000. This number can be significantly less for some borrowers.
The implications of taking out this loan is that default is not punished by loss or repossession of any asset, unless it is part of a larger financial arrangement that specified some sort of personal liability. The opposite of this is the secured loan, which is tied to an asset like a house, property or vehicle. If one defaults then the lender repossesses the property that has been put up as collateral to recover their debt. Because of the security component, secured loans typically offer higher limits than unsecured ones. They are also normally cheaper than the secured ones.
A payday loan is more of a stopgap measure, a short term loan option that fills a gap before regular payment comes. The typical payday loan is often expected to be paid back within a period of one and 30 days. They normally involve small amounts, between £25 and £1,500, smaller than is normally offered by other lenders or loan types. Due to their short term nature, they might also be referred to as same day loans, instant loans or fast cash loans. They also carry much higher interest rates than other comparable loan types.
The logbook loan is technically a secured loan, but one where the borrower puts up their vehicle as collateral. The lender will then take ownership of the vehicle until the debt is paid. However, while the lender essentially has ownership of the vehicle, it is ‘lent’ to the borrower during the loan period to continue using. The ownership of the vehicle is transferred back to the owner once the debt has been paid. Normally, the logbook allows one to borrow up to a half of the market value of the vehicle.
Still, if the vehicle’s value depreciates during the time of the loan, the borrower will still be liable to meet the shortfall. One particular advantage of logbook loans is that they offer loans to people with poor credit scores who might otherwise be denied loans through the normal channels. Logbook loans should be differentiated from car loans, which are loans given for the purpose of buying cars. Car loans can be given be through banks directly or on hire purchase through dealerships.