OK, so you can't go to the Bank of Mum and Dad but you still
need a fast loan - what are your options? You can look on the high street or
online and see there are many different types of loan on offer ...
A secured loan (sometimes called collateral loans) is where
a loan company or bank can reclaim the goods if you stop (default) payments.
Due to the opportunity to repossess the goods in the case of default this has
been historically an easy loan route with lower interest rates. With a secured
loan you make monthly payments over a fixed time, often two to five years and
the goods are the security for the lender.
But, due to the present financial conditions, banks in
particular have become reluctant to lend very much money to anyone. Many people
consider the banks have brought all this on themselves but the impact on anyone
needing a loan has been negative.
An unsecured loan is more risky for the lender who hasn't
any security other than your word that you will repay the loan. If, for
example, you borrow money for a holiday (not advisable) and then default on the
payments there's nothing for the loan company to repossess. Or, a business plan
could go wrong and the investment lost. Again there is nothing to be
repossessed by the lender.
Due to the lender's increased vulnerability relating to
unsecured loans the amount able to be borrowed is generally less with far
higher interest rates.
A credit card isn't regarded by most people as being a loan
but that's exactly what it is and is probably one of the most commonly
accessible forms of fast loan. You are given a limit on spending and a minimum
amount to repay each month. It's pretty much the only fast loan that can also
be free because if you pay your debt off fully each month you pay no interest.
When used sensibly credit cards are an excellent source of credit. But beware,
if used badly they'll end up costing you a fortune as they can have sky high
interest rates.
A Payday loan is to cover an emergency that means you need
cash quickly. Maybe your car unexpectedly breaks down or the washing machine
falls apart. All sorts of events can happen at any time that constitute an
emergency and you need help to pay for replacements or repairs. Payday loans
are for these eventualities and are an easy and fast loan to acquire. They are
intended to be short term - to your next payday - and can be arranged very
quickly either on the high street or online with the cash often being available
within hours.
Payday loan Interest rates are far higher than for other
types of loan but, because of the short time scale you don't end up paying too
much interest. But, be sure you will have the funds to settle your account
rather than have to extend the loan which will incur more interest to pay.
