One of the key points to consider when evaluating how to raise the funds you need is whether or not you wish to secure what you borrow.
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Secured loans normally involve lower rates of interest and lower monthly payments over an extended time frame when compared with an unsecured product. However, you will probably end up paying more than you would if you had chosen a shorter term. And, of course, your personal risk is increased because if you default, your property may be at risk of repossession.
A secured loan is often a good idea if you are looking to fund a big ticket item such as a new car or perhaps are planning some home improvements. Secured loans can also be used to consolidate debt.
It’s worth bearing in mind that if the level of equity in your home is worth a fair bit more than the balance of your mortgage, you may be able to extend it – although there is no guarantee that this will be at the same rate of interest as your current product.
It is absolutely vital that you only secure a loan against your home if you are confident that you can afford to do so.
If you don’t currently own a property, or if you don’t want to take the risks associated with a secured loan, you may want to consider taking out an unsecured loan. Alternatively, you could apply for a low-interest credit card or a new or extended overdraft facility.
Generally speaking, a personal loan is most suitable for one-off expenses. How much you will be able to borrow depends in large part on the lender, but it is often a sum of between one and fifteen thousand pounds.
An overdraft is a way to borrow that is attached to a current account. Funds raised in this way can be used for a variety of purposes. An overdraft is a flexible way to borrow, and the application process is normally easy and the decision time short. While using an overdraft can be a competitive way to borrow the money you need in the short term, it is probably not the way to go if you need a larger amount and wish to repay it over a longer period of time. Remember too that fees for unauthorised overdrafts can be steep.
Another flexible way to borrow money is to take out a new credit card. If you are eligible for a 0% interest card, this can be an excellent way to consolidate your existing debt. Make sure you repay the debt or transfer to another card before the introductory period ends, though, or you will be looking at a hefty interest-rate hike. Making only the minimum repayment will cost you far more over time, and it will also take a lot longer to pay off the total balance. Depending on your circumstances, you could make lump-some repayments from time to time to help clear the loan faster.