Finance Choices
Don't let your personal loan become a personal moan
Most of us have been in a position at some point when we simply have had insufficient funds to pay for something. This could be car insurance/repairs, course fees, holiday, Christmas presents, electrical items or even the weekly shopping. According to Credit Action, 2.4 million personal loan agreements were recorded in the first quarter of 2005, totalling £13.5 billion. The national debt education charity reported that 30% of the personal loans were for cars, 24% for home improvements and 20% for debt consolidation. The total outstanding balance for personal loans reached £93 billion by March 2005.
Personal loans can help you out of a difficult period when cash-flow is restricted, but don?t go for the first one you find or you may find that your loan becomes a lifetime commitment and lifetime strain. There are numerous personal finance comparison websites available for personal loans including moneynet, moneyfacts and lowermybills.
In their consumer loans guide, moneynet advise that as a general rule of thumb, the more you borrow ? the cheaper the rate of interest. For example, a loan of £1,000 may carry an interest rate as high as 20% - reportedly justified by the lenders because of the relatively high administration costs associated with arranging a loan. For larger personal loans, lenders might only charge interest rates of around 6%.
Personal loans fall into two categories: secured and unsecured. Unsecured personal loans are the most popular, as secured loans may jeopardise the borrower?s property or other asset. Secured loans are arranged on the assumption that the borrower puts up a form of security to the lender, typically the borrower?s property. This allows the lender to take ownership of the asset should loan repayments be jeopardised. Whilst the prospect of losing your home may seem like a major disadvantage, the benefits of a secured loan often allow you to borrow more money at a lower rate of interest.
Despite such benefits however, most people are reluctant to lose their home and therefore take out unsecured loans because of this.
When reviewing personal loans and researching the cheapest loan on offer, you should be aware that you need to investigate the terms and conditions, as well as the annual percentage rate (APR). Note that if your credit history is poor ? then the terms of the loan may reflect this. Do your homework on redemption penalties and any other charges which might be associated with your loan. Some lenders will also offer payment breaks (deferred payment) either at the beginning of the loan period, or perhaps during the term, but again read the terms and conditions and check that excessive interest will not accumulate over any break periods.
Personal loans in the UK are governed by the Consumer Credit Act 1974, but remember that you are ultimately responsible for borrowing a given sum of money and that once you sign a credit agreement, you are bound by the terms and conditions.
If you are finding the repayments challenging, always tell the lender as soon as possible and remember that any loan repayment problems are likely to be captured in your credit record/history, which will later impact on any other borrowing.
Personal loans can help you out of a difficult period when cash-flow is restricted, but don?t go for the first one you find or you may find that your loan becomes a lifetime commitment and lifetime strain. There are numerous personal finance comparison websites available for personal loans including moneynet, moneyfacts and lowermybills.
In their consumer loans guide, moneynet advise that as a general rule of thumb, the more you borrow ? the cheaper the rate of interest. For example, a loan of £1,000 may carry an interest rate as high as 20% - reportedly justified by the lenders because of the relatively high administration costs associated with arranging a loan. For larger personal loans, lenders might only charge interest rates of around 6%.
Personal loans fall into two categories: secured and unsecured. Unsecured personal loans are the most popular, as secured loans may jeopardise the borrower?s property or other asset. Secured loans are arranged on the assumption that the borrower puts up a form of security to the lender, typically the borrower?s property. This allows the lender to take ownership of the asset should loan repayments be jeopardised. Whilst the prospect of losing your home may seem like a major disadvantage, the benefits of a secured loan often allow you to borrow more money at a lower rate of interest.
Despite such benefits however, most people are reluctant to lose their home and therefore take out unsecured loans because of this.
When reviewing personal loans and researching the cheapest loan on offer, you should be aware that you need to investigate the terms and conditions, as well as the annual percentage rate (APR). Note that if your credit history is poor ? then the terms of the loan may reflect this. Do your homework on redemption penalties and any other charges which might be associated with your loan. Some lenders will also offer payment breaks (deferred payment) either at the beginning of the loan period, or perhaps during the term, but again read the terms and conditions and check that excessive interest will not accumulate over any break periods.
Personal loans in the UK are governed by the Consumer Credit Act 1974, but remember that you are ultimately responsible for borrowing a given sum of money and that once you sign a credit agreement, you are bound by the terms and conditions.
If you are finding the repayments challenging, always tell the lender as soon as possible and remember that any loan repayment problems are likely to be captured in your credit record/history, which will later impact on any other borrowing.
posted by Bruce Wayne at 8:41 AM
Don't let your personal loan become a personal moan
4 Comments:
I am a small company looking for a personal loan. I have bad credit and the company has only been around for 7 months. I am looking for $8,000.00 over 3 years and am willing to pay a high interest rate. I would like the loan to be unsecured but am willing to put the Equipment I own up for collateral (approximate value is $7,000.00). Can anybody help me? The company is a Lawn/Landscape business in Florida.
I am in a very desperate situation I'm 51 years old & am a self employed building contractor I have 98.000 in unsecured debt made up of 12 CCs & a loan, over the years (10ish) I foolishly at times had a spend now & pay later outlook however that accounts for about half that debt, the rest was accrued by subsidising earnings where I fell short when work was slow/non existent, my wife & I are hard workers we work every day & even on weekends on a regular basis in order to make ends meet, but after many years it has become obvious that working for customers just doesn't bring enough money to make ends meet, we never eat out or order takeaway we're non smokers & watch every penny & have taken advise from these boards & applied it in order to save every penny, I recently bought a house (Feb 06) for 151000 a semi I put down a deposit 10% on a self certified mortgage so 15.100 I just had a central heating system installed (there wasn't one in the house previously) I'm also putting in a new bathroom- kitchen- drive- doors-floors etc the house had not been improved for 26 years ( have I bored you yet) I've never defaulted on any loan but I now have only about 5.000 left in the bank and work is slow, I want to take out a secured loan about 40.000 on my new house, the reason for my insanity is I want to stop working for customers & to buy-fix-& sell on houses, I think it's the only way I can get my self out of this mess & I've been renovating homes for others for so long it's time I did it for myself, my estate agent said my house should be worth about 180.00 when I'm done, I'll soon have about 75% finshed in the next couple of weeks but really can't afford to wait until I'm done before applying for a loan as I may run out of money & start defaulting on my debts, which at this point in my life is the last thing I want to do, does anyone out there in mse land think it's possible for me to get a secured loan under my circumstances, especially as I just bought my house, anyway for those of you who have read through the whole of this thread Thank You & even if you can't really help me, well thanks anyway for helping me to get this off my chest, I'll look eagerly for any response hope to hear from you soon, but for now I'm off to work.
Bob,
How is your secured loan going to help exactly?
Even if the estate agent is right, when you sell the property you aren't going to even make enough to repay your mortgage and secured loan and will still have almost £100k in unsecured debt.
I seriously think you need to go and talk to citizens advice or a debt charity about your options. As I see it, even if you can renovate two properties a year, you are still going to have difficulty clearing your debt before you retire.
Would it not be better to enter into some sort of debt plan or even consider bankrupcy? At least then you have a chance of relieving yourself of some of the debt and using some of the money you earn in the next decade to put towards your retirement?
Sorry not to be more positive - but getting yourself into more debt doesn't seem like a way out.
Babs
Hi Babs,
Thanks for reading my post, & for thinking it through & responding, if I sold the house say 6-24 months from now it would pay for the mortgage & secured loan remember my mortgage amount is 135.000 thats after I had put down my original deposit of 15.000 if I sold it for 180.000 that would be enough to take care those loans, I would be able to turn over 3 houses in one year no sweat, 2nd year I'd be overlapping houses, in other words two at a time it's almost as easy to do 2 at a time as one at a time, I'd continue that way each year for the next few years & chuck every extra penny at the unsecured debt, I've often spent 7 days a week working so that's no problem, I figure if I'm this much in debt right now I might as well take another bash by getting the secured loan (if I qualify under my circumstances) & make a last stand so to speak, even if I knocked out 75% of what I owe that would put be back in control, it may all be wishful thinking but if I'm going to go down in flames by planning a bankruptcy now, I may as well give my plan a bash & if it doesn't work I'll go bankrupt in a year or so, I know it's not the right move to continue getting into further debt but at the same time I'm trying to do what I do best which is work hard, but the twist on it is I'd be working hard not to make my customers homes look good, but to work hard renovating houses for myself to make money from, one other thing is, & it may sound weird but I don't ever want retire, I'll work until I drop!! I really enjoy what I do, even when I have some down time I work around my house, so what do you think am I crazy or what?
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